A competitive euro is increasing profit margins for exporters, stimulating demand for indigenous support companies and enabling firms in the Republic to target the lucrative US market, according to Mr John Whelan, chief executive of the Irish Exporters' Association.
Mr Whelan said yesterday a competitive euro was good for the domestic economy because it relied heavily on exports to countries outside the euro zone. He said 94 per cent of GDP was currently being exported and 60 per cent of this went to non-EU countries.
He said exports to the US rocketed last year spurred on by the weak euro. This was enabling many Irish technology firms to gain a foothold in the lucrative American market. Figures compiled by the CSO show exports to the US grew more than £8 billion in 1999 up from £6 billion in 1998, representing a rise of 30 per cent.
But not only technology firms are benefiting from a weak euro. Mr Barry McChesney, group accountant with meat processors, the Kepak Group, said a large percentage of the company's sales were in Britain. "This doesn't mean the volume of our exports has necessarily increased much but we are making 5-6 per cent more profit on the same volume of exports."
However, a weak euro could present some short and long-term difficulties for indigenous companies, according to Mr Pat Delaney, director of the Small Firms Association.
"We import a huge amount of goods from the UK which is our fifth-biggest customer. Stronger sterling means these products are more expensive to Irish customers resulting in `bought in' inflation," said Mr Delaney.
The strength of sterling and the dollar means importers sourcing goods from these areas cannot buy forward and small companies are having to source new suppliers within the euro zone, said Mr Delaney.
He added that some small firms were experiencing difficulties with language and a real shortage of market information.
The textile and clothing industries, which traditionally relied on imports priced in sterling or dollars, have been hit hard, according to Mr Ray Kenny, owner of ADS Ltd, a textile agency based in Dublin.
"People are screaming to source European suppliers," he said. "But there is a limit to what people will find within the euro zone. Dye is generally priced in sterling while yarns are priced in dollars."
Mr Kenny said currency fluctuation was one of the reasons causing manufacturers to look towards setting up low-cost manufacturing operations abroad. The Small Firms Association is also concerned about the long-term effects of a strong sterling. Mr Delaney said British companies have had to improve efficiency to such an extent that if sterling weakens in the future, Irish companies will come under pressure from British competition.
"The SFA has a valid point. If sterling weakens it could pose a threat to our exporters, so we are encouraging our client companies to build capability and competitiveness," said Mr Tony Jones, manager of the regions and Britain for Enterprise Ireland.
