Rise in exports boosts hope on Brexit fallout

A surprisingly broad-based growth in exports in the first few months of the year show that the Irish economy may have weathered the initial fallout from Brexit following sterling’s drop against the euro since the UK’s vote last June, analysts said.

That may herald good news for Irish business as economists try and figure out just how the plan by UK prime minister Theresa May for a snap general election will affect sterling and the British economy.

The CSO figures showed that exports of both sides of the economy, which include the big pharmaceutical and technology multinationals, as well as the so-called traditional industries such as agriculture, increased their export sales in the first two months of the year.

The traditional side of the economy which tends to sell their goods across the Irish Sea into Britain is particularly important as an anchor for prosperity because it employs so many people across so many firms. It includes industries such the agri-food firms which are highly susceptible to the weakness of sterling because it makes competing against firms in the UK so much harder.

However, the CSO figures showed that a long list of goods exports which make up the backbone of small business economy, including meat, dairy, vegetable and fruits, and other edible products, recorded robust growth in January and February from the same two-month period in 2016.

Exports from multinationals, which are usually insulated from currency fluctuations, however, did much better. Chemical exports climbed to over €11bn in January and February from €9.9bn over the first two months in 2016.

In February alone, the CSO said exports to Britain increased by €189 million, or 19%, compared with February 2016, to over €1.16bn.

Alan McQuaid, chief economist at Merrion Capital, said the resilience of the UK economy since last June may explain why demand for Irish exports increased in the early part of the year. “Some of the fears may have been overdone,” he said.

However, he warned that, with British prices rising sharply in the wake of sterling’s losses, there were signs that UK consumers were starting to rein in spending.

Davy Stockbrokers economist David McNamara said that both pharmaceuticals and traditional industries boosted exports, which could lead to “a larger contribution to GDP growth” this year.

Capital Economics in London said that, at first sight, the rebound in sterling on Ms May’s election decision may appear “surprising”.

“One possible reason why the pound instead rose is that an early election might trigger the removal of Jeremy Corbyn as leader of the Labour Party,” said Capital. “Along with probable increased power for the Liberal Democrats, this might lead to more effective opposition to the government’s vision of Brexit. But this is far from clearcut. The hard Brexit discount evident in the pound’s value last year has long since diminished.”

The UK-based Centre for Economics and Business Research said that said an increased Tory majority “will increase economic and policy stability and reduce the current sense of business uncertainty”.

Sterling rose to 83.8 pence against the euro. The euro also faces the uncertainty of the first round of the French presidential elections on Sunday. Against the dollar, sterling rose to its highest since December.