Sterling drop ‘won’t make our prices fall’

THE immediate effect of the Brexit vote was a collapse in the value of sterling against the euro, which makes imports from Britain less expensive.

Everything from clothing and children’s toys will be cheaper for retailers – but it is unlikely the prices in shops will fall dramatically, according to business leaders.

Mark Fielding, chief executive of the Irish Small and Medium Enterprises Association, members of which include many shopkeepers, said: ‘Inflation is flat at the moment. So if you’re buying jumpers in one of the British chain stores for €40 they’re unlikely to be €39 next week because of the exchange rate change. There’s a history of that, that they don’t drop it down. But it should help stop any inflationary pressures and keep it down at the low level it is. It’s unlikely to drop but it’ll keep it down.’

The pound sterling fell from being worth €1.30 before the result to just €1.20 early yesterday as the verdict became clear – a drop of nearly 8%, which is considered dramatic in money markets.

It means a £5,000 second-hand car imported across the border would previously have cost €6,500 to buy, but now costs just €6,000 – a €500 saving. Ireland’s main imports are electrical machinery and components (16% of total), fuel (15%), motor vehicles (10%), food (10%) and medical and pharmaceutical products (9%). A third of our imports come from the UK.

Irish Exporters Association chief Simon McKeever explained how much of our trade with the UK works, saying: ‘We export the raw materials which then get put in a box and sent back here and sold in a high street that is predominantly a UK high street now.’

Davy stockbrokers’ chief economist Conall Mac Coille said a predicted fall in UK trade was unlikely to push Ireland into recession.

‘Past macro-econometric estimates suggest that a 1% reduction in UK GDP reduces Irish GDP by 0.3%,’ he said. ‘On balance, we do not think Brexit will be sufficient to push Ireland into recession, but it could push Irish GDP growth down by 1-2% in 2016/17.’

And Barry Dowling, co-founder of global payments provider Transfermate, advised Irish importers to ‘contact suppliers as soon as they can to lock down pricing before inventory levels run lower and decisions are made by suppliers to increase pricing’.

‘If you can benefit from a weaker sterling and security in relation to pricing, you are likely to be in a stronger position,’ Mr Dowling added.