Jobs threat as euro-sterling parity forecast by end of 2017
Published 05/10/2016 | 02:30
The slide in sterling now threatens thousands of jobs in Ireland, with experts warning the pound will reach parity with the euro as soon as next year.
The pound hovered around a three-year low against the euro yesterday, intensifying the pressure on Irish exporters and the tourist industry here.
One global bank is already predicting parity by next year - which would mark a massive watershed moment in the history of the currencies.
The sharp plunge in the value of the UK currency so far this year goes hand-in-hand with the fallout of June's Brexit referendum.
Irish exporters, farmers and tourist-related businesses here all said they had been grappling with the effects of the sharp weakness in the UK currency his year, particularly in the wake of June's Brexit referendum.
It comes as the International Monetary Fund downgraded Irish growth fractionally and warned of subdued global growth, with the Brexit vote partly to blame.
The IMF hiked its prediction for UK growth this year as the British economy proved more resilient than expected in the wake of the referendum, but cut it for 2017.
Currency analysts expect sterling to weaken further against the euro to the 90 pence mark by the end of the year - a situation which business body Ibec has already warned could cost thousands of jobs across the Irish economy.
A weaker pound poses cost and competitiveness issues for Irish firms selling into the UK market, as it becomes more expensive for British consumers to buy their products.
There are also implications for the tourist industry here, as Irish destinations become more expensive for UK holidaymakers.
John Wraith, head of UK rates strategy at global bank UBS, warned that the pound could suffer a fate similar to what it experienced during the financial crisis.
UBS forecast that by the end of next year, the pound and euro would reach parity.
"When the global financial crisis entered its acute phase, sterling resumed its rapid decline, falling a further 20pc by the end of 2008," Mr Wraith said. Investors have been spooked by a series of announcements at the Conservative Party conference, where Prime Minister Theresa May said the two-year process of negotiating Brexit under Article 50 of the EU treaties would start by the end of March.
Many economists and investors fear the UK government will back a "hard Brexit" option where Britain quits the single market in favour of imposing controls on immigration.
Justin Doyle of Investec Ireland told the Irish Independent that while he can see sterling hitting the 90 pence mark against the euro by the end of this year, too many factors were at play to make a determination on where it would be by the end of 2017.
But UBS isn't a lone voice on the global banking stage predicting parity.
In the summer, HSBC also forecast there could be parity between sterling and the euro by the end of next year.
Business lobby groups here have said the currency issue is one of the biggest facing Irish exporters, with Ibec warning firms face a currency crisis akin to that of the early 1990s.
The business body has warned that the impact on UK-focused export sectors, such as agri-food, will be particularly severe.