British ‘no to euro’ blow to small companies

SMALL businesses will be hardest hit by Britain’s decision not to join the euro, ISME warned last night.

In a recent survey, 53% of ISME clients said a decision by Britain to stay out of the euro would have a negative impact on their business performance.

One in four said it would threaten jobs which were already under fierce pressure due to the global economic downturn, and the loss of Irish competitiveness aggravated by high inflation, soaring insurance costs and steep wage increases.

ISME head of research Jim Curran said 70% of small firms, those employing under 250 people, are dependant on the British market for their exports.

“The decision by Britain not to join the euro will mean a further weakening of sterling, exposing Irish firms to additional loss of competitiveness,” he said.

Firms are reeling from huge cost increases at home and the dip in the exchange rate has compounded their difficulties, he added.

One in four said they were under pressure from British firms in other markets and Mr Curran described the implications of the decision as a “double-whammy for Irish firms with exports under threat in Britain and overseas, while the domestic market is under pressure from British imports at the same time,” he said.

IBEC director of economics Brian Geoghegan said the not unexpected decision, put further pressure on firms selling to our nearest market.

While our total exports to Britain have fallen to 25%, it was still hugely important to us.

Competitiveness is a matter for ourselves and companies will have to deal face up to that issue themselves by tackling their own costs if they want to survive, he said.

Britain will require an exchange rate in the range of 75p-85p to the euro before it could join the eurozone, background treasury studies revealed yesterday prior to Chancellor Gordan Brown’s “not yet to the euro” statement to the House of Commons yesterday.

That figure was much higher than the 65p-75p the markets anticipated as an entry point for sterling to the euro.

Such a dip in the value of sterling has serious implications for exporters, and the fear is that sterling will continue to weaken as the euro debate drags on. Irish firms, however, have lived with an exchange rate of £1.10 in the past, Bank of Ireland’s Dan McLaughlin said.