Irish exports to Britain grew by 8% last year, to €14.4bn, despite fears of a prolonged contraction due to a weaker sterling, which drove a 3% fall in 2016.
Latest CSO data show total Irish export performance grew 2% in 2017 to reach a record value level of €122.1bn. In volume terms, growth was 10.7%.
The overall improvement was driven by the medical and pharmaceutical sector, where export value grew by 17% to over €35.4bn. Exports of food and live animals grew by 12% to €11.3bn.
Imports also had a record year, increasing by 4% to €76.9bn in value terms. As a result, Ireland’s preliminary trade surplus for 2017 inched up by 0.2% to €45.25bn.
This year is expected to be another good one for Irish exports — the Central Bank recently forecasting 4.4% growth this year and 3.9% for 2019. However, Brexit clouds the outlook from then on out.
“Even excluding volatile pharmaceuticals, exports were up 2.5%, while exports to Britain grew by 8% — confounding fears of a sterling-induced fall. With global growth buoyant, 2018 looks set to be another positive year. However, the medium-term threat of a ‘hard’ Brexit remains a cloud on the horizon,” said Davy economist David McNamara.
“The trade outlook going forward remains clouded in uncertainty due to Brexit, but we are still anticipating another solid performance this year.
“Indeed, we are at this juncture projecting another record surplus, of €47bn,” said Merrion Capital chief economist Alan McQuaid.
“One can only speculate as to how Brexit will impact Ireland going forward, but there is clearly likely to be a negative impact on trade. The UK is the second largest single-country for Ireland’s goods and the largest for its services. At the same time, Ireland imports 30% of its goods from the UK.
“While the UK might only account for 16%-17% of Ireland’s total exports, 30% of all employment is in sectors which are heavily related to UK exports. SMEs — related to agri-food and tourism — will likely be more affected than larger companies by the introduction of tariffs and barriers to trade,” he added.
“Business and consumer confidence have been dented to some degree, though not in a major way by the uncertainty surrounding Brexit.
“Still, the uncertainty over the implications of Britain’s decision to leave the EU suggest risks on the external trade front remain elevated going forward, especially for food exporters,” said Mr McQuaid.
Financial support for traditional economic sectors such as agriculture and tourism — from both Ireland and the EU — will be required after Britain’s exit from the EU, professional services giant Mazars has said.
“Integrating Ireland’s trade with the EU has not progressed really since the financial crisis. Ireland remains highly integrated with the UK and the majority of that trade is in traditional sectors — primarily agriculture and agriculture-related business, tourism and logistics. This is where Brexit will hurt most,” said Mazars managing partner Mark Kennedy.
“These traditional sectors remain very important to our economic success as they are a critical provider of employment in regional areas. Both Ireland and the EU need to financially support these businesses.
“We need to strengthen the focus on government initiatives that support Irish businesses to build markets in Europe,” he said.
This article first appeared in the Irish Examiner on February 16, 2018. Written by Geoff Percival.
Read further insights from Marks Kennedy on Brexit and the challenges for Irish business HERE
In what is being described as “uncharted waters”, a period of “turmoil and uncertainty” generally for the UK and the rest of the EU and “of economic uncertainty for Ireland”, the UK will cease to be a member of the EU following the narrow “victory” for the leave campaign.
The exact consequences for future policy and regulation remain unknown. It will take time to fully understand the implications of the vote, and it is important to note that Article 50 of the Lisbon treaty provides for two years, from the date the UK Government gives notice to the Council of Europe, to negotiate and agree exit terms.