Irish exporters benefit from the single currency
As a small island nation, the export economy has always been important to 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 around the world. While the US and UK markets remain extremely important markets for Irish businesses, there are very good reasons to focus more on growth in the Eurozone, and this is largely due to one very important element – the single currency.
he euro area is a huge and relatively untapped market for Irish businesses. It has 340 million inhabitants and is located in the largest free trade area in the world. Thanks to the single market and the customs union, the euro area also acts as an extension of our internal market in terms of ease of trade. Despite this, the Eurozone still lags the UK in terms of numbers.
In 2020, Enterprise Ireland’s corporate clients’ exports to the euro area totaled € 5.85 billion, or 23% of our total exports. In the same year, the UK remained the largest export market for Enterprise Ireland companies, with a total of 7.51 billion euros in exports, or 29% of our total exports. Yet the euro area’s population and GDP are five times that of the UK.
For Irish SMEs, the euro area is a particularly attractive proposition because the single currency can make a significant and immediate difference in profits. Irish businesses have the ability to manage currencies through our strong and ongoing relationship with the UK; however, anything that requires intervention can be categorized as overhead. By eliminating the overhead costs associated with currency exchange, Irish businesses can immediately improve their bottom line.
Second, exchange rates are volatile – and this is something Irish SMEs have experienced in recent years. During the period of Brexit discussion and formalization, we have seen the real damage that currency volatility can cause. Margin uncertainty existed throughout the sales cycle, so by the end of the cycle, companies often saw their projected margin completely eroded by currency volatility.
The impact of currency volatility should not be underestimated. It’s a risk, and as an asset class it’s probably the most volatile. As we enter a period of inflation and fluctuating interest rates, this volatility could worsen further. Removing this risk can therefore only have a positive impact on Irish businesses.
We are also a member of SEPA, the Single Euro Payments Area, which significantly reduces transaction costs and the time it takes to make a payment. Together with the single currency, this makes it easier for small businesses to forecast their income, receive and make payments.
In addition, to address any language or local culture issues, Enterprise Ireland has eight offices located in the Eurozone, with market advisers on the ground to provide Irish exporters with key industry expertise and market information. market, which makes it easier than ever to start a business in a European country.
Right now we have a unique advantage in the euro area. We are located in a strategic position on the borders of Europe, we are the only English speaking nation in the euro area and we are members of the single currency. These factors, combined with our reputation for producing dynamic businesses with highly sought after and innovative solutions, place us in an excellent position to reap the rewards of our membership in the world’s largest free trade area. And with multiple opportunities in areas where Ireland has a lot to offer, such as agritech, engineering, life sciences, high tech construction and digital technologies, now is the time for them. Irish companies to explore and take advantage of the many opportunities offered by the euro area.
Anne Lanigan is Regional Director – Eurozone at Enterprise Ireland. Thanks to John Power, Managing Director of SGL, a strategic financial consulting firm, for his advice and contribution to this article.
On September 24, Enterprise Ireland and the Institute for International and European Affairs (IIEA) will present the finale of a three-part webinar series, Europe is our future. Register on the IIEA’s website, www.iiea.com.