The pound fell to its lowest level against the euro since the single currency was introduced in 1999, as the currency markets digested comments by the British chancellor of the exchequer, Alistair Darling, that Britain was facing its worst economic downturn for 60 years.
In early trading yesterday the euro traded at 81.39p, its highest ever rate against the pound, but it declined slightly to 81.05p by late afternoon while it traded at a two-year low of $1.80 against the dollar.
On Saturday, Mr Darling told the Guardian that economic conditions were “arguably the worst they’ve been in 60 years”.
The result has sent the British currency into a tailspin which spells very bad news for Irish companies, said Jim Curran, head of research, at ISME, the Irish Small and Medium Enterprise.
Sterling’s decline puts huge pressure on the 47% of Irish firms who export to that market, he said.
For some time Mr Curran said the situation for Irish exporters to Britain had become “highly grim and is getting worse”.
The dependence of Irish-owned firms on the British market “is more than twice the national average, which shows a huge reliance by native companies on that market as an outlet for their overseas sales”, he said.
“Margins are being undercut and the prognosis is not good for firms trying to operate in that market at present,” he said.
The fall in sterling means Irish firms are facing stiffer competition on the home market and also in markets overseas where they compete with their British counterparts, he said.
“Costs are a huge issue and we have to become a lot more cost effective.”
He called on the Government to give a lead in that regard and demanded a halt to stealth charges that have placed such a high burden on Irish business in recent years. Of the 47% of companies selling to Britain, recent research showed 65% regard this as their main export market.
Of those, 56% are paid in sterling, and 39% in euro while 40% of all SME exports go to Britain.
At this stage 68% are threatened by British competitors on the domestic market, 71% on the British market and 44% in other markets, he said.
The government should act to control inflation in particular cost increases under the control of the State, he said.
It should help cut business costs, including energy, transport and local charges and desist from introducing further stealth taxes on business, he said.