Ibec, the group that represents Irish business, has demanded a decisive and immediate national response to the Brexit currency shock, which has left many key export businesses reeling, with jobs already under threat.
The warning from the country’s main business organisation comes as a new survey highlights the intense currency strain on exporters following the UK vote. Business is moving quickly to manage severe competitive pressures, but an urgent, targeted national response is essential.
The survey found that the negative exchange implications of the UK vote is by far the biggest concern of business. Almost half (45 per cent) saw this as the main threat. Exporters are operating with a major competitive handicap in the UK market, while domestic firms are facing the prospect of cheaper UK imports grabbing market share.
In a stark assessment, Ibec Director of Policy Fergal O’Brien said: “The Brexit strain is manifest and intense. Without urgent action to address competitive pressures, hundreds of millions of euro worth of exports and thousands of Irish jobs will be lost.
“Individual businesses have been slow to talk publicly, but the feedback from members is clear and unambiguous. Businesses and jobs are already under threat.
He continued: “This is now a full blown currency crisis. For exporters, the speed of sterling’s decline is on a par with the 1992 currency crisis. Irish exporters to the UK are already 15 per ecnt less competitive and things could get much worse. The problem demands urgent government attention.”
Key results from an Ibec survey of over 450 businesses on the impact of Brexit include:
- The main concern is the sharp fall in the value of sterling; almost half of all businesses saw this as the main threat (45 per cent)
- Exchange rate volatility, weaker investor confidence, and competitiveness against the UK are the top three challenges identified
- Cheaper UK imports was cited as the biggest risk by one third of respondents (33 per cent)
- Only one in ten (9 per cent) of businesses have Brexit contingency plans already in place
- Only one in four exporters (24 per cent) have currency hedging arrangements in place and, for many, this protection will expire over the coming weeks and months
- A renewed focus on competitiveness was identified as the most important Government policy response required
Separate economic analysis from Ibec also found that the impact on UK focused export sectors, such as agri-food, will be particularly severe. The analysis of the historical exchange rate and agri-food export relationship shows that a 1 per cent weakness in sterling results in a 0.7 per cent drop in Irish exports to the UK.
Ibec believes that an immediate Brexit response package should include:
- An enterprise stabilisation and employment support fund available to the worst affected firms, similar to the measures introduced following the 2008 crisis
- An intense ongoing focus on cost competitiveness in areas such as labour costs and the minimum wage, on policy decisions that would adversely impact PSO charges on electricity; and on insurance costs
- A concerted drive to secure exemptions to EU state aid restrictions to allow the Irish government to match grant aids which will be available to UK based manufacturers
- A fully ‘Brexit-proofed’ Budget which will address tax competitiveness challenges against the UK and facilitate Ireland to take advantage of any FDI opportunities which will arise