Delayed UK vote could slow Irish exports drive

A delay in the UK referendum on staying or exiting the EU would likely take the sparkle off a key factor driving Irish exports because it would extend the period of uncertainty for sterling, leading economists have warned.

Trade figures for 2015 published yesterday showed something of a ‘golden era’ for exporters and in particular for labour-intensive Irish indigenous firms which had tapped the high level of sterling against the euro to sell lots of goods into Britain.

However, doubts about whether British prime minister David Cameron will be confident enough of winning his Brexit referendum to allow him to call a vote by June have eroded the competitive advantage of the strong sterling exchange rate. 

The pound has weakened to 77p against the euro from 70p last November, which is “quite unhelpful” for Irish exporters, said Philip O’Sullivan, chief economist at Investec Ireland.

Mr Cameron is only seen naming a date if UK opinion polls convince him he will win the vote for Britain to stay in Europe. 

The longer the delay in calling the referendum, the longer the uncertainty over Brexit will weigh on sterling, said Alan McQuaid, chief economist at Merrion Capital.

Sterling has also been unexpectedly held back as markets bet the Bank of England will only start hiking interest rates in 2017, and not as early as this summer as had widely been anticipated several weeks ago.

The importance of sterling for Irish exporters therefore adds to the importance of this week’s EU summit on Mr Cameron’s draft reform proposals. 

He wants EU leaders meeting at a two-day summit starting on Thursday to give their backing to the UK’s proposals. 

A date for the UK referendum may be set soon after.

Mr O’Sullivan said a number of the factors, including the expectations of an early rate increase, have now gone and eroded somewhat the keen competitive edge for Irish exporters.

Investec believes sterling could jump nonetheless if polls showed a willingness to stay in the EU, which would lift the uncertainty facing sterling. 

Analysts said there was plenty of evidence in the exports figures published yesterday that showed the importance of a weak euro. 

The CSO figures showed goods exports climbed 20% in the year to hit a new peak of over €111bn in 2015.

Exports had fallen steadily for several years from the €90.7bn reached on the eve of the economic crash in 2017.

Chemical and pharmaceutical exports from the huge multinational firms hit €64bn last year accounting for well over half of all Irish goods exports.

However, a number of predominantly Irish-owned industries also showed strong exports growth.

Exports of manufactured goods such as metal products rose in the year to almost €2.1bn from €1.87bn, while a list of other manufactured goods, including furniture and footwear, rose to €14.25bn from €12.63bn in 2014. 

The exports drive was led by the multinational pharmaceutical industry, said Davy Stockbrokers.

“The impact of the [pharmaceutical] patent cliff was felt in 2012 and 2013, with the pharmaceutical exports contracting by 3.8% and 10.6 respectively and rising by just 1.3% in 2014,” its chief economist Conall Mac Coille said.

“However, the sector is clearly benefiting from the introduction of the next generation of pharmaceuticals, with exports up 31% in 2015.”


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