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Small companies on 'survival alert' as sterling falls further

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AS sterling fell to parity with the old Irish pound, the Small Firms Association (SFA) warned that many small export companies are struggling to survive.

Yesterday, the British pound fell further, to reach 78.2p to the euro, despite high inflation figures which suggested the Bank of England will find it difficult to cut interest rates much further. The Irish pound converted into euro in 1999 at an entry level of 78.76p. It is the first time that sterling has approached these levels since.

The assistant director of the SFA, Avine McNally, warned of "devastating effects" on exporters if sterling fell as low as 74p to the euro, as some forecasters have suggested.

"It is unrealistic to expect small Irish companies to compete at such a rate against sterling," McNally said.

There were already cases of firms moving to Britain or Northern Ireland, or thinking of doing so, she added.

"One involves a company in Roscommon which exports all its products to the UK and employs 24 people and is moving to England. According to the owner, the loss of 24 jobs will be devastating in one of the country's unemployment blackspots," she said.

Another company, 12 miles from the border, was operating almost entirely in sterling and said it might as well be located across the border.

She said specific measures would have to be taken to reduce employment costs for the most vulnerable and exposed companies.

"Significant rebalancing will have to take place to reduce our transport, energy and service costs," McNally said.

Some of the most-promising new export companies were on "survival alert".

"It will be an absolute tragedy if they fail to survive because of a problem which is outside their control," she said.

The SFA says that Britain accounts for one-third of all the exports from small firms. With 70pc of all small exporters selling into the UK market, around 60,000 jobs are dependent on UK trade links.

"There are a whole series of negatives for the economy flowing from the current situation. Further increases in the value of the euro will have a devastating effect on our competitiveness.

"The reluctance of the ECB to cut interest rates because of eurozone inflationary pressures, will further compound the competitive pressures already impacting on small exporting countries."