Weak euro not just bad for Easter eggs

When it comes to economic indicators it is fair to say that sales of chocolate eggs tend not to be widely employed as a tool. But this being Northern Ireland, the usual economic rules tend not to apply.

Chocolate eggs – or rather the price of a chocolate egg this Easter in a border town or city – perfectly illustrates why the bitter taste of a weak euro cannot be ignored by businesses or retailers in the North.

Take Newry for example, which is currently battling to attract consumers North and South to partake of one of its many Easter retail promotions. Just a few miles across the border Dundalk is doing the exact same thing, but this year it has the advantage of waving a big weak euro flag at Northern consumers which the local chamber of commerce believes is going to work in its favour.

Paddy Malone from Dundalk Chamber of Commerce says retailers may introduce a blanket exchange rate on certain streets to entice Northern shoppers over the border this Easter.

“We do believe the euro exchange rate is going to give us an advantage this Easter. We are seeing more and more Northern-registered cars in our car parks and we believe the favourable rate for sterling will bring more business into Dundalk,” Malone says.

Many, like Ulster Bank chief economist in Northern Ireland Richard Ramsey, believe the majority of cross-Border trade will flow south as the euro continues to drift.

“It is going to be a reverse of the trend of the last seven years which saw South-to-North cross-border retail trade. Shopping centres close to the Border are likely to suffer most, which could threaten their financial viability.”

Euro combat zone

But Ramsey says retail is not the only sector bearing the brunt of currency movements. More worryingly, one of the largest employers, the food and drink sector, is in the front line of the euro combat zone. Latest industry statistics show that the agri-food sector supports nearly 100,000 jobs locally and accounts for the majority of exports south from the North each year.

It is estimated this export business is now worth £1 billion and, according to Michael Bell, executive director of the Northern Ireland Food & Drink Association, it is growing every year.

“Food is a low-margin, high-volume industry and the very significant movement in the euro over the last nine months is a challenge for local producers and the industry.

“It means prices in euroland are significantly cheaper than they are in sterling land and we have to deal with that – in some cases raw materials may now be cheaper, or packaging or haulage costs, which means that the reduction in input and the reduction in output may be broadly neutral,” Bell says.

Overall he believes the long-term prospects for the food and drink sector in the North are very bright.

“There is a worldwide demand for our produce,” he says.

But Bell also wants local foods firms to be vigilant about any measures that can mitigate costs and he believes the agri-food sector needs to work at accessing new markets that it “can and should be in”.

Food producers aside, local farmers are also likely to suffer when it comes to the impact of the fluctuating euro/sterling exchange. It is anticipated farmers will receive the lowest Single Farm Payment – which are set in euro and converted to sterling – since 2007. For many local farming businesses, the Single Farm Payment is the the difference between profitability and struggling to survive.

Although the North has been caught in the euro/sterling net before, there is a prevailing anxiety that the timing of this particular migration could hit businesses harder than they might anticipate.

Sacrificing profitability

Stephen Kelly

, chief executive of the campaigning organisation Manufacturing Northern Ireland, says some businesses are having to sacrifice profitability just to hold on to contracts at this time. This means businesses simply will not be able to reinvest in the short term.

“We’re a border community so we’ve dealt with two currencies for a long time, but this dip is very hard for exporters,” he says. “Some are losing trade. On one hand, supplies may be cheaper in the euro zone but the value for business is what they can sell – not buy.

“The longer the uncertainty over exchange rates continues, the more sustained the long-term impacts.”