Business representative body Ibec has warned further pain lies ahead for exporters already reeling from sterling’s depreciation in the wake of June’s Brexit vote.
The pound has depreciated by 13% against the euro since UK voters chose to leave the European Union three months ago.
Rather than some of that effect unwinding in the coming months, the situation is likely to deteriorate further for exporters, whose goods are now more expensive across the Irish Sea.
“Over the coming months, it is likely that sterling will continue to weaken and the exchange rate will move towards 90p with the economic situation in the UK expected to deteriorate.
"Those selling goods in Ireland will also face challenges due to increased competition from cheaper imports,” Ibec warned in its Q3 Economic Outlook.
While the initial Brexit impact has been muted, its longer term effect remains just as unclear as it was after the vote, with “the unknowns outnumbering[ing] the knowns by some distance”.
Despite the result having changed the external economic environment “irrevocably”, a broad-based economic recovery is well-cemented domestically.
Leaving the highly distorted CSO growth figures for 2015 of 26% aside, indicators such as consumer spending and employment figures all point to an improving domestic economy.
Car sales, up 15% in July on the previous year, have given retail sales a boost, with other durables such as household goods experiencing strong growth in 2016.
Inflation will remain muted over the coming months which, allied to rising wages, will see even greater real wage growth for workers.
Nevertheless, Budget 2017 remains critical with radical reform to the entrepreneurs’ capital gains tax regime along with improved investment and innovation incentives at the top of Ibec’s wishlist.
“Potential trade restrictions post-Brexit and the more preferable tax treatment of SMEs in the UK itself rather than by exporting from Ireland. As such, the need to level the playing field in relation to the tax offering for indigenous business has never been more urgent.”
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