The eurozone consists of 340 million people and is in the biggest free trading area in the world
As a small island nation, the export economy has always been important for the sustainability and growth of the Irish economy. We are known as a country of innovation with ambitious entrepreneurs and a flexible approach to business, making Irish companies a popular choice throughout the world. While the US and the UK markets remain incredibly important markets for Irish businesses, there’s a very strong case to be made for increasing our focus for growth on the eurozone, and much of this is down to a very important element – the single currency.
The eurozone is a massive market and relatively untapped by Irish companies. It consists of 340 million people and is in the biggest free trading area in the world. Thanks to the single market and customs union, the eurozone also acts as an extension to our domestic market in terms of ease of trading. Despite this, the eurozone still trails behind the UK in terms of numbers.
In 2020, exports to the eurozone by Enterprise Ireland client companies totalled €5.85bn, representing 23pc of our total exports. In the same year, the UK remained the largest export market for Enterprise Ireland companies, with a total of €7.51bn in exports, which is 29pc of our total exports. Yet, the eurozone’s population and GDP is five times that of the UK.
For Irish SMEs, the eurozone is a particularly attractive proposition as the single currency can make a significant and immediate difference to profits. Irish companies have the capability for dealing with currency thanks to our ongoing strong relationship with the UK; however, anything that requires intervention can be categorised as an overhead. By eliminating the overhead associated with currency exchange, Irish companies can immediately improve their bottom line.
Secondly, currency exchange rates are volatile – and this is something that Irish SMEs have experienced in the last few years. During the period that Brexit was being discussed and formalised, we saw the real damage that currency volatility can do. Margin uncertainty existed throughout the sales cycle, so by the end of the cycle, businesses often saw their projected margin completely eroded through currency volatility.
The impact of currency volatility must not be underestimated. It is a risk, and as an asset class, it is probably the most volatile. As we are entering into a period of inflation and interest rate changes, that volatility could get even worse – so eliminating that risk can only have a positive impact on Irish companies.
We are also members of SEPA, the Single Euro Payments Area, which significantly reduces transaction costs and the time it takes to make a payment. Along with the single currency, this makes it far easier for small companies to forecast revenue, and to receive and make payments.
In addition, to help with any language or local culture issues, Enterprise Ireland has eight offices located across the eurozone, with on-the-ground market advisors to provide Irish exporters with key sectoral expertise and market intelligence – making it easier than ever to begin trading in a European country.
Right now, we have a unique advantage in the eurozone. We are located in a strategic position on the edge of Europe, we are the only English-speaking nation in the eurozone and we are members of the single currency. These factors, combined with our reputation for producing dynamic companies with highly sought-after and innovative solutions, put us in a great position to reap the benefits of our membership in the biggest free trading area in the world. And with multiple opportunities in areas in which Ireland has much to offer, such as agritech, engineering, life sciences, high-tech construction and digital technologies, now is the time for Irish companies to explore and take advantage of the many opportunities afforded by the eurozone.
Anne Lanigan is Regional Director – Eurozone at Enterprise Ireland. With thanks to John Power, Managing Director of SGL, a strategic financial advisory firm, for his advice and contribution to this piece.
On September 24, Enterprise Ireland and the Institute of International and European Affairs (IIEA) will present the final of a three-part event webinar series, Europe Is Our Future. Register on the IIEA website, www.iiea.com.