Weak sterling sees exports to Britain dip

The weakening of sterling against the euro is starting to impact on the competitiveness of Irish exports, data from the Central Statistics Office indicates (CSO).

External trade data from the CSO shows a 20 per cent fall in the value of exports to the UK in August 2008 compared with the same month the previous year.

Dr Ronnie O'Toole, chief economist at National Irish Bank said while Ireland was less exposed to the UK than previously, "exporters to the UK tend to be relatively labour intensive". 

Therefore while the impact of lower exports to the UK on aggregate exports may be relatively minor "the effect on employment in the export sector could be more significant".

Based on forecasts on the British economy a deep recession there was likely to coincide with a euro/sterling exchange rate below 85p next year with export markets in Eastern Europe and the US also likely to suffer next year, Mr O’Toole said.

He added that almost half of all indigenous exports are to Britain with nine out of ten such exporters having trade exposure to the country.

Overall exports held steady at €7.17 billion in September and are 4 per cent lower over the eight-month period to August at €57.2 billion.

On a sectoral level exports from the mostly foreign-owned pharmaceutical sector performed well in August, rising from €3.2 billion to €3.4 billion.

According to the CSO data a decline in consumer spending has contributed to a 5 per cent fall in the value of imports in September. This is the lowest total for the month of September in four years.

For the eight-month period between January and August imports are 7 per cent lower at €39 billion when compared with the same period last year.

During this period the value of computer equipment imported into the State was 25 per cent lower while the value of vehicles brought into the State was 19 per cent down.

A falling oil price has seen the cost of energy imports fall to around €300 million in September compared with €550 million in May.

The Irish Exporters Association (IEA) called on the Government to establish a State-backed credit insurance scheme to export companies. This insurance is to cover the suppliers against the potential failure of their customers to pay.

A State scheme was required because of the increase in the number of insurers withdrawing credit insurance for exports to Russia, Central America, South America, and Eastern Europe, as they were seen as more risky.

According to John Whelan, these countries were also offering "some of the best export growth opportunities" for Irish exporters.

"In a period when credit is restricted from the banking sector internationally, any lack of any export credit insurance means that it becomes almost impossible for Irish exporters to trade in these markets," he said.

Mr Whelan pointed to the creation of a state-backed credit insurance scheme by the French Government today as an example of what was required.