Trade drifting South on sterling strength

The continued strength of sterling is causing serious problems for Northern Ireland companies, particularly those which are trading with firms in the Republic.

The weakness of the euro, and the consequent strength of sterling against the pound, is good news for Northern Ireland visitors to the Republic, and for the increasing number of Northerners who are buying their cars from Southern dealers. But for Northern Ireland companies trying to sell goods into the euro zone, or for those trying to run a filling station along the border, the strength of the pound is a real problem.

When the euro was introduced in January last year, the pound stood at 90 pence, but since then it has declined steadily.

Among those most likely to feel the consequences are retailers in border towns such as Newry, which is particularly vulnerable because of its proximity to Dundalk.

However, Mr Gerard O'Hare, the developer of the 200,000 square foot Quays Shopping Centre, says that the effects of the sterling/pound differential has been exaggerated. Mr O'Hare said that the centre was continuing to do well, and that the sterlingpound exchange rate was not creating a barrier to trade in Northern Ireland, for either shoppers or retailers.

"The number of shoppers who regularly travel from North to South to take advantage of the favourable exchange rate has been well documented," he said. "But the Quays is doing good business with customers from both sides of the Border. People assume that it is more expensive to shop in Northern Ireland, but what they forget is that the strength of sterling gives Northern Ireland retailers much greater buying power overseas."

The president of the Newry Chamber of Commerce, Mr Jerome Mullan, admitted that a lot of shoppers were going South, mainly because of the difference in fuel prices.

"That's a huge incentive for people to head South," Mr Mullan said. "But when it comes to shopping, the picture is not so clear. Shopping centres in Newry are doing very well, and they've had a very good Easter.

"There are a lot of new shops in the town, and people are attracted to them, and most of them are prepared to pay a bit extra in order to shop there. So it's not all one way."

Mr Conor Cahalane of the Anglo-Irish Bank said it was very difficult for businesses in Northern Ireland to remain competitive with their counterparts in the South.

"I really don't see it getting any better, at least not in the short term," Mr Cahalane said. "It's really down to economic fundamentals, and until those fundamentals change, and there is a renewal of confidence in the euro and the euro zone, then I'm afraid sterling is going to remain strong."

Mr Nigel Smyth of the Confederation of British Industry said that although sterling had been at a high level for almost three years, Northern Ireland had continued to perform well.

"We had a record year last year in terms of manufacturing output," Mr Smyth said. "I think the problem we have now is illustrated by the survey we published last week, which showed that expectations of winning new export orders have fallen dramatically.

"Companies are being squeezed, they're not making profits, and those that are trading in the Republic are losing money on their orders. The problem now is whether they will have sufficient profits to invest for the future."

Mr Smyth said that the weakness of the euro was beyond the control of Northern Ireland industry, but that companies could take measures to lessen its impact.

"We have to look at ways to increase productivity, and reduce costs," he said. "Equally, government should not be putting any more cost pressures on business, whether that is through employment legislation, climate change levies, or fuel taxes."

Mr Smyth said that on the contrary, the government should be looking for ways to ease the burdens on the business community.

"Although we may be doing well now, and the figures indicate that output may be growing, companies are constantly having to trim their margins in order to remain competitive, and that is just not a sustainable position to be in."