Friday 30 September 2016

Uncertainty is understandable - but Irish business has already taken a hit

Published 17/08/2016 | 02:30

'Uncertainty. Get used to hearing that word every time attitudes towards the Brexit vote are measured over the coming months.' Photo: Getty Images
'Uncertainty. Get used to hearing that word every time attitudes towards the Brexit vote are measured over the coming months.' Photo: Getty Images

Uncertainty. Get used to hearing that word every time attitudes towards the Brexit vote are measured over the coming months.

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The survey by GroupM suggests consumers are worried, but there's an element of head scratching about what it all means. And how could it be anything else? The UK is in political and economic limbo. Theresa May isn't expected to pull the trigger on kick-starting negotiations with the EU until 2017, meaning the remainder of this year will be dominated by speculation and little real sense of what the post Brexit world will look like.

The survey shows that 64pc are concerned about the future of the country as a result of Brexit. That's hardly surprising given the multitude of economic reports and analyses that have argued Ireland's strong links with the UK means the latter's EU withdrawal will be a negative for us.

But 76pc say their spending habits haven't changed since the Brexit vote, suggesting consumer confidence hasn't been overly dented.

Analysts will be keenly watching Exchequer Returns in September, and crucially in October ahead of the Budget, to see if this is the case. VAT receipts last month were lower than had been expected, and question marks will be raised if that trend continues.

But if consumers have yet to see any material impact, it might not be long before they feel the Brexit chill wind. Irish businesses, particularly retailers and those companies exporting into the UK market, have suffered an immediate knock.

They've had to deal, from the outset, with currency volatility. It's been the one tangible downside so far, and the effect has been swift.

The marked weakening in sterling versus the euro (the pound was hovering close to a three-year low yesterday at just under 87 pence to €1) has dented the competitiveness of Irish exporters, prompting business body Ibec to warn that companies are facing a currency crisis.

Retailers may lose customers to Northern Ireland, where the stronger euro means they'll get more bang for their buck.

Businesses will therefore be forced to keep costs in check. And that could be where people start to feel the Brexit hit in their pockets. This newspaper reported earlier this week that the Government is veering away from introducing any increase in the minimum wage in the Budget on the back of the Brexit vote. Business lobby groups are also opposed to pay hikes.

In this era of heightened uncertainty, the Government faces the tough task of ensuring consumer confidence is maintained, while helping to keep businesses competitive.

Irish Independent

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