Sterling weakness against euro hitting competitiveness of Irish exports

THE WEAKENING of the sterling against the euro is starting to affect the competitiveness of Irish exports, data from the Central Statistics Office indicates (CSO).

External trade data from the CSO shows a 20 per cent fall in the value of exports to the UK in August 2008 compared with the same month the previous year.

Dr Ronnie O'Toole, chief economist at National Irish Bank, said that while Ireland was less exposed to the UK than previously, "exporters to the UK tend to be relatively labour intensive".

Therefore, while the impact of lower exports to the UK on aggregate exports may be relatively minor, "the effect on employment in the export sector could be more significant".

Based on forecasts on the British economy, a deep recession in the UK was likely to coincide with a euro/sterling exchange rate of below 85p next year, with export markets in eastern Europe and the US also likely to suffer next year, he said.

Overall exports held steady at €7.17 billion in September and are 4 per cent lower over the eight-month period to August at €57.2 billion. On a sectoral level, exports from the mostly foreign-owned pharmaceutical sector performed well in August, rising from €3.2 billion to €3.4 billion.

According to the CSO data, a decline in consumer spending has contributed to a 5 per cent fall in the value of imports in September. This is the lowest total for the month of September in four years.

For the eight-month period between January and August, imports are 7 per cent lower, at €39 billion when compared with the same period last year.

During this period, the value of computer equipment imported into the State was 25 per cent lower, while the value of vehicles brought into the State was down 19 per cent.

A falling oil price has seen the cost of energy imports fall to about €300 million in September compared to €550 million in May.

The Irish Exporters Association called on the Government to establish a State-backed credit insurance scheme for export companies.