Currently the Euro has strengthened which is affecting Irish Exporter margins, find out what you can do. Today’s modern economy places the exporter/importer at the forefront of an economy. Within Ireland, 51% of all economic activity in 2014 was purely exporter related.
What businesses may forget to keep in mind is currencies and fluctuations that may occur. To date 40% of Irish exports is concentrated between the United States and United Kingdom. As a result, businesses may need to accept US Dollars or great British Pounds. Last year the US Dollar appreciated by
By the end of this blog post, I hope that an exporter will understand how to save a little money each time a transaction occurs throughout the year.
Background on Irish Exports
Currently Ireland has had some interesting changes throughout the past sixteen years, most notably regarding activity on a global export trade basis. For instance, in 2001 Ireland accounted for 1.2% of global goods exports which was very strong considering our population size. At the same time we had 1.1% of service. However in 2013, we accounted for 2.6% of global services output and just 0.6% of goods output.
Currently to date the top five exporting industries account for 70% of Irish exports. These include; pharmaceuticals, organic chemicals, medical/technical, perfume/cosmetic and mechanics. On a company basis in 2015, Microsoft topped the list with 18.2 billion euro worth of exports, Google exported 17 billion euro and Johnson and Johnson exported 10.5 billion euro. Kerry Group exported over 5 billion euro and Total Produce exported 3 billion euro within the food based category.
What affects an exporter?
From our perspective, currencies can cause a massive fluctuation between how much one batch of imported or exported products can cost. For instance, Irish beef products exported to Britain have become slightly more expensive. This is due to the Euro increasing in value against the Pound since before the start of the New Year.
As a result, an Irish steak (worth €20 for example) has become more expensive by just over 40 pence. While this is not a massive rise over the past month, it could be enough to hurt a restaurants margins or a big grocery chain orders of Irish Steak.
Currently 41% of all food related exports are sent to the United Kingdom. Now is the time to manage this problem and begin to organise a solution for this problem.
Why has the Euro gained in value?
The Euro has increased in value because of a couple of very simple reasons. Firstly, David Cameron has stepped up his efforts regarding the renegotiation of UK membership of the European Union. This has caused investors within the Forex market to seek out safe havens such as the Euro and Dollar.
Secondly, this safe haven effect has been amplified because China’s economy is beginning to slow down. China is beginning a transition into a balanced economy focusing on manufacturing and services with a developing stock market influence. However throughout the past 9 months, the Chinese stock markets (Shanghai and Shenzen composite index) have been consistently propped up by the Chinese government.
Thirdly and possibly most worryingly is the British economy. When George Osborne first became finance minister of the UK, he wished to stabilise and balance the economy. However signs of this materialising have never occurred, especially as the economy depends on the services sector more than ever. Currently the services sector accounts for 70% of economic activity within the UK.
How an exporter can manage currency exposure in seven steps:
- Figure out have you got a problem. Fish out the last three times you received a payment, has there been a difference?
- If so, then chat with us to compare us with your last transfer
- Once you fill out the form, we will get back to you outlining how much you would have saved
- If you are happy with the saving, you can register an online account
- Begin to consistently read our news articles, which keep readers updated on current events related to the Euro, British Pound, US Dollar including Aussie, Kiwi and Loonie
- Become aware of significant event such as central bank meetings, (Bank of England this Thursday), (ECB and Federal Reserve meet in March)
- Follow us on Twitter or LinkedIn if you like to mingle the social business aspect into your day