Vroom: Brexit has me driving in the fast lane
How some Irish businesses are cashing in on weakening pound.
Published 10/07/2016 | 02:30
Another day, another dollar... or in the case of those savvy Irish entrepreneurs capitalising on the weakening British pound, it's 'another euro'.
While the markets panic, the hedge funds freeze and Britain's political establishment scratch their collective heads, there are some on this side of the Irish Sea actually benefiting from the chaos that Brexit - or at least the realistic threat of it - brings. Every cloud...
True, the window of opportunity to use the weak pound to our advantage may be short, but every news bulletin of woe emanating from Britain brings a smile to some faces, and painful grimaces to others.
We've heard of convoys of giddy southern shoppers heading over the border into towns such as Newry with bulging wallets full of precious euro. Cousins of mine hit Harrods last weekend and nailed themselves a few bargains.
And Irish businesses which import from the UK are faring particularly well too.
At his desk in the Baldoyle Industrial Estate, Richard Smith, who runs UK Car Imports, barely has time to knock back his hot morning brew before the flood of emails into his inbox starts to emerge.
"In the run-up to the Brexit referendum, uncertainty as to how the British would vote had an impact on the pound and we benefited as a result. But when they actually did vote to leave, well, we've been inundated ever since," says Richard as he grabs a few minutes to talk on another busy day at the business he runs with colleague Jason Duffy. Since the referendum, enquiries have increased threefold and car sales have doubled.
Running as a banner across the company's homepage is the line: "Euro reaches all time highs vs Sterling, now is the time to buy!"
"Motorists in Ireland can see the potential for substantial savings. At the moment, because of the weak pound, you could save €5,000 on a 2013 BMW 5 series, that's serious money, and sterling is falling all the time. I would say the average savings on a car now range between €1,000 and €5,000," explains Richard.
And as the uncertainty continues, it's expected that sales in the second half of the year will gather pace.
"Based on current levels of business, we'd expect to sell between 150 and 200 cars imported from the UK this year, which would see our company move to a new level," says Richard.
"At the moment there are two of us working here in Dublin, and we have a buyer in the UK, but we may well end up taking on one, if not two, additional people to deal with the increasing demand and level of enquiries."
The company charges a fixed fee of €295 to locate and buy each vehicle, regardless of the cost of the car so turnover is totally dependent on the volume of car sales.
While some in the Irish motor industry fear an influx of second-hand British cars will reduce the value of cars purchased in Ireland, leading to negative equity, Richard Smith believes it would be wrong to protect a sector when the consumer demands more choice and better value.
"It's an open commodity market, the Irish Government benefits from the VAT and VRT earned on sales, and we already import so many second-hand cars from Japan, so I can't really see any problem."
It's estimated that at least 50,000 cars are imported from the UK each year.
And UK Car Imports has actually invested in additional online advertising this year to coincide with the referendum in Britain, and is installing software to help visitors to their website calculate VRT costs on possible purchases.
"We're not naïve, we realise there is so much uncertainty and things will not remain the same forever. But for now, we'll do what we can to use this opportunity to expand the company and drive on," says Richard.
Indeed many Irish importers are benefiting from the fluctuating money markets. Those wholesalers who import large volumes of British food and drink products are doing particularly well at present, and where possible are buying in bulk.
And while they are concerned by the potential for price hikes by their British suppliers, and the imposition of tariffs should the UK leave the single market, they are quietly doing rather well out of sterling's ailing health….for now.
The total value of imports from Britain into Ireland last year came to a staggering €19.9bn compared with export values from Ireland to the UK totalling €14.7bn.
But short-term gains and strengthened purchasing power may dwindle once reality bites on the other side of the Irish Sea.
"My hope is that any price hikes would be neutralised by the comparative strength of the euro against the pound," says Paul Maher, the MD of Four Corners, a Dublin-based business which imports and distributes craft beer and cider in Ireland.
Many of the products Four Corners sell here come from the UK and Paul, originally from Listowel, anticipates that before long we'll see the price of imported goods creeping up.
"Inevitably, the breweries which we buy from will see their own costs increasing. Many get their malt from the continent and beyond, and their hops from the United States.
"The weakness of sterling means it's going to cost so much more to brew their beers and that cost will be passed on. This is true of many sectors so while imports may seem less expensive now, I don't see that lasting too long," says Paul.
Most of the British-sourced stock Four Corners holds was purchased before the Brexit result. Paul is hoping prices remain as they are when he goes to reorder. If they do, then the company will increase their margins in the short term at least.
In business since 2004, Four Corners has grown steadily in tandem with the increased interest in craft beers amongst Irish consumers.
"We're building steadily, and of course we, like so many others, could have done without the volatility which Brexit brings. But in saying that, we know that even during the last downturn here in Ireland, more and more people turned to craft beer. We believe we can ride out this wave and go from strength to strength," explains Paul Maher.
Not surprisingly, the business and employers' organisation Ibec can see very little in the way of positive benefits from Brexit for Irish business. They described the result as "a major blow to Ireland" and Gerard Brady, a senior economist with Ibec, told Review: "There may be some marginal exchange rate benefits to companies which import heavily from the UK, but at an economy-wide level, this will have a pretty insignificant impact.
"In either case it will be more than offset by the challenges a weak sterling will bring to Irish exporters and the income effect of having an underperforming neighbour."
And he said the marginal exchange rate benefits may not always trickle through to the end consumer.
"Given the strong levels of price competition in Ireland and the structure of supply chains and pricing arrangements in larger firms, there will be limited impact of currency fluctuations on prices in the short-term," he said.
Making hay while the sun shines may be the order of the day for Irish business as we keep our fingers crossed for stability in the medium to long term. But even those importers benefiting from the weakened pound accept that uncertainty helps no one. Strong leadership is required to lead us through the fog of money-market war.