Since the announcement of Britain’s exit from the EU, the Euro has strengthened by almost 13% against the pound. Since then, sterling valuations have dipped up and down like a yo-yo. Recent news reports, as published by the Irish Examiner, claim that the two currencies could eventually end up on a par by the end of the year.
Predictions of said parity between currencies has been made by many financial institutions including HSBC, Citi and Morgan Stanley. They lay the claim that the two currencies would be at the same level within a couple of months. This means that Irish exporters could face losing millions, with a possibility of exporters having hundreds of million of euro wiped from the value of their trade to the UK. Early suggestions say that this volatility of the sterling has reduced the value of trade by over half a billion, €570 million.
The recent Sterling to Euro fluctuations have already had an effect on the Irish Agri-food sector, leaving businesses wondering what the future may hold. This has led to managing the currency volatility becoming a prime area of focus for Ireland’s Drinks and Food exporters.
Many currency traders are stubborn in their belief that this parity may not happen, with increased fluctuations in sterling expected once Brexit is finalised. One financial organisation claim that this parity will not happen without another recession within the UK.
UK importers have promised to keep prices down in lieu of Brexit, though this cannot be banked upon either with the high level of uncertainty surrounding Britain’s EU exit. Many of said importers have already refused to increase prices for last years imported Irish produce. This resulted in Irish produce receiving up to 15% less than their worth before the announcement of brexit. Mushroom exporters from Ireland were the main affected sector, due to a high dependence on UK markets (90%).
The UK currently import just over 50% of all Irish Beef produce, while they also import 30% of all dairy produce, 60% of cheese exports, 44% of food exports, 84% of poultry, 29% of beverage exports and finally 28% of all sheepmeat trade. This shows just how important the UK markets are to Irish businesses. But what does this all mean for Irish farmers?
In reality if Irish producers begin to receive lower prices for their products or indeed if their produce is valued lower as reported, then there would be an obvious ripple effect on Irish Agriculture. Should producers have less profits of their own to work with, this would surely lead to lower prices paid to Irish suppliers. This would mean lower beef, dairy, sheep and poultry prices being paid out to farmers at a time when prices have only started to gradually rise again.
The effects could be seen as early as next week, with an annual meeting of the tops economists and central bankers due to take place. Here they will announce plans of how the hope to peg back the price difference between the euro. The euro has outperformed most currencies in 2017 so far and has increased by more than 6% in value.