SFA concerned about rise in value of euro

The Assistant Director of the Small Firms Association, Avine McNally, has said that the SFA is increasingly concerned at the rise in value of the euro against sterling.

According to Ms McNally, the reluctance of the ECB to reduce interest rates in the light of Eurozone inflationary pressures will raise the competitive pressures on small exporting companies.

The euro/sterling exchange rate is currently at parity with the old Irish punt/sterling.

This week alone the SFA has received several complaints from member companies who are seeking some alleviation from what is now a "crisis" situation for many small exporters to the UK because of higher interest rates, higher domestic input costs, higher energy costs and exchange rate volatility.

According to Avine McNally, Assistant Director, SFA two of the complaints highlight the problem being encountered.

“The first involves a company in Roscommon employing 24 people which exports 100% of its product to the UK. The company, at its last management meeting stated it will relocate to England. According to the owner of the company the effect of the loss of 24 jobs will be devastating on one of the countries unemployment blackspots. However, this outcome is inevitable should the unrelenting rise continue.

The second situation involves a company employing 33 people located in the North Western region only 12 miles from the border. The owner has stated that for all intents and purposes it might as well be located across the border. It operates almost entirely on a sterling account and conducts the vast majority of its transactions through sterling. The company has discounted the option of hedging as the costs associated with buying forward are prohibitive.”

According to McNally, some of the more salient statistics in relation to our links with the UK can be summarised as follows:

70% of small companies who export do so into the UK market.

The UK is our most important market, accounting for one third of all small business exports.

Approximately 60,000 jobs in small companies are dependant on UK trade links.

According to McNally, “all the indicators are that the situation will continue to deteriorate,

economic commentators are now predicting that the exchange rate would rise above 135c during 2008. The consequences of such a move are extremely worrying.”

The SFA is therefore calling for a two-stage approach to the situation

Specific measures to reduce employment costs for our most vulnerable and exposed companies.

Significant re-balancing will have to take place to reduce our transport, energy, and service costs.

According to McNally this action is necessary to protect existing employment, maintain Ireland as a competitive exporting economy and to recognise the realities of our relationship with the sterling area.