Exports of goods to the UK have increased despite the headwinds facing firms from the slump in the value of sterling, new figures suggest, but detailed figures reveal that goods typically made by Irish firms have not fared so well.
The CSO said exports to the UK increased €154m, or 14%, to €1.24bn in May from May 2016, and also increased 14% in January to May by €732m, compared with the same five months of last year, boosted by a surge in exports of chemicals.
The value of sterling has slumped around 13% against the euro in the past year, which should make it much more difficult for Irish manufacturers to sell goods across the Irish Sea. The figures ostensibly suggest that exporters are performing much better than would have been anticipated.
The figures were hailed by Tánaiste and Enterprise Minister Frances Fitzgerald who said “the Government is committed to facilitating the development of a strong exporting sector”.
However, a breakdown of the figures suggests that pharmaceutical multinationals, which account for a huge share of all manufactured goods exported from the island, were still increasing exports to the UK.
Chemicals and pharmaceuticals are less price-sensitive to any exchange rate movements.
The latest figures suggest that Irish-owned firms involved in selling products into the UK are faring less well. Exports to the UK of mineral fuels, manufactured goods, and machinery and transport equipment either fell or were little changed in the first five months of the year compared with the same period last year.
Exports of food and live animals to the UK, however, increased by €92m to €1.52bn over the same period.
Sterling fell from a 10-month high against the dollar and fell against the euro to 87.8p amid concern that discord within the UK government is worsening.
The concerns come as the UK starts its second round of Brexit negotiations with the European Union.
Sterling snapped a recent advance as UK chancellor of the exchequer Philip Hammond exposed tensions within the British cabinet.
He has stated that transitional arrangements at the end of the Brexit talks with the EU are likely to last a couple of years, far longer than the couple of months suggested by UK Trade Secretary Liam Fox.
The UK currency had rallied last week on more hawkish rhetoric from the Bank of England and weaker-than-expected US inflation data.
Any divisions within prime minister Theresa May’s government could make it difficult to secure a good deal with the EU, while also posing a risk that her weakened mandate could crumble, forcing new elections in the UK.
“We’re seeing the division at cabinet level laid increasingly bare,” said Ned Rumpeltin, head of currency strategy at The Toronto Dominion Bank in London, who sees the pound falling to $1.26 by the end of this quarter. This “will be a factor for sterling all the way through the Brexit process, for as long as the current government stays in power,” he said.
Meanwhile, the policy chief of the City of London has told Reuters that the UK must negotiate a staggered departure from the EU in the next few months or risk seeing thousands of finance jobs move overseas.
Additional reporting Bloomberg
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