Belfast Telegraph

Fears for Northern Ireland's tourism trade as Euro tumbles and Sterling soars

But holiday-makers reap the benefits of exchange rate

By Adrian Rutherford

Sterling's soaring value could spell trouble for Northern Ireland's tourist industry this summer as savvy consumers opt for cut-price holidays abroad.

The pound has hit a seven-year high against the euro in recent days with £1 now buying €1.34.

And some experts are predicting that by the summer, the euro could fall to its lowest level since 2002.

Sterling's value has soared in the wake of a near £900bn cash injection announced by Brussels to kickstart Europe's ailing economy.

Northern Ireland is particularly affected by the strengthening pound because of our land border with the Republic - and it spells both good and bad news.

While holiday-makers can take advantage of the cheapest season since the crash, tourist chiefs could find it harder to attract visitors in the opposite direction.

Ulster Bank chief economist Richard Ramsey said: "Northern Ireland has become more expensive for tourists from the eurozone.

"Conversely, holidaying across the border in the Republic or the eurozone hasn't been cheaper since 2007."

Exporters - particularly in the food and drink industry - will also be hit because goods manufactured here suddenly become more expensive for Europeans.

Sterling has been steadily rising in value against the euro since July 2013.

In recent days it has hit a seven-year high, fuelled by the European Central Bank's (ECB) massive quantitative easing gamble. The ECB will print nearly £46bn every month between March this year and September next year - a total of almost £900bn.

The massive stimulus sent the euro tumbling on the foreign exchange markets.

And the results of Greece's snap election could lead to more volatility.

Last night exit polls predicted a triumph for the radical left Syriza party. Its leader Alexis Tsipras has pledged to reverse the country's ruthless austerity programme.

The move could trigger a stand-off with IMF and EU leaders which may yet see Greece default on its debt and leave the euro altogether.

It could see the euro continue to fall in value. In recent days sterling has reached €1.337 - its strongest since January 2008.

It means that holidays on the continent, already at their lowest level in seven years, are now even cheaper. However, it is a reverse scenario for visitors, with Northern Ireland now more expensive for tourists from the eurozone. Mr Ramsey said challenges associated with inflation had now given way to problems caused by the strengthening pound.

"Lack of demand from the eurozone, including the Republic of Ireland, is likely to be a problem this year whereas the inflationary pressures have disappeared," he added.

Exporters are also likely to suffer because the cost of goods produced here will become more expensive for European buyers.

This is perhaps most marked in the food and drink sector.

During the downturn the industry prospered due to a weak pound as producers in the Republic struggled, allowing Northern Ireland companies to steal the market share in Britain.

However, as with tourism, the situation is now reversed, with firms from the Republic poised to take advantage.

The Northern Ireland Chamber of Commerce said the exchange rate was an increasing concern and a big challenge for exporters.

Chief executive Ann McGregor said: "The eurozone, particularly the Republic of Ireland, is such a major market for Northern Ireland's exporters and the strength of sterling only makes it harder for local businesses to compete.

"Businesses fear that sudden currency shifts could mean the difference between trading at a profit and a loss.

"Such concern may inhibit smaller companies from exploring the opportunities continuing to develop today in global markets."

Experts believe the euro will continue to fall, and predict that by July £1 could buy up to €1.55 - a 13-year high.


The latest NI Tourism report highlights just how heavily the sector relies on visitors from the Republic and Northern Ireland. Of those who made an overnight trip here from October 2013-September 2014, 51% (2.2m) were by a Northern Ireland resident. A further 27% of overnight trips (1.2m) were from people living in Britain, 8% from the Republic and 13% from outside the UK.

Sterling rises in value: The pros and cons

Q. Sterling is at a seven-year high against the euro - what exactly does the exchange rate mean and why does it matter to me?

A. Put simply, it is the value of our currency, the pound against the euro. As things stand one pound will buy you 1.34 euro.

Sterling has risen steadily against the euro since summer 2013 and is now at a seven-year high. This time last year, for example, one pound would only have bought €1.20. A rising rate means you get more euro for your pounds, which is good news for anyone going across the border or travelling in the eurozone. It has big implications for Northern Ireland because we share a land border with a member of the eurozone - the Republic.

Q. Who benefits from a strong pound?

A. Obviously holiday-makers, as it means their cash will go further. Anyone heading to Europe will benefit from cheaper prices on everything from hotel stays to restaurant meals to sightseeing. The Post Office estimates that a combination of strong competition and a weak euro will make European holidays up to 20% cheaper than they were last year.

It is also good news for ex-pats who live in the eurozone but receive their income in pounds. For example an income of £2,000 a month will now buy you around €2,600, up from about €2,400 a year ago. That's effectively a yearly pay rise of £2,400.

Q. So it's not all good news then?

A. Not quite. While tourists travelling to the eurozone will enjoy better deals, the reverse is not true for those heading in the opposite direction. Their euro will now be worth less, making it harder to entice people to come to Northern Ireland.

A weaker euro also makes goods manufactured here more expensive for Europeans, hitting our exporters. This is a particular problem in our food and drink sector. Businesses that trade predominantly with Europe could suffer as a result.

Q. Why is the pound getting stronger?

A. Exchange rates can vary for many reasons, including government debt, the relative strength of other currencies and government intervention. Last Thursday's announcement of a near £900bn cash injection for the eurozone has also lowered the value of the euro. The move is essentially a massive money-printing programme. It will see the European Central Bank buy government and corporate bonds across the 19 countries of the single currency bloc. It could boost the Republic's finances alone by £370m a year. Yesterday's election in Greece may yet trigger a fresh crisis which could see the euro fall even further.

Q. I'm going on holiday later this year. Should I be rushing out to get my money changed now and take advantage of the good rate?

A. Possibly. There is no doubt you will get a better deal than at any time in the last seven years. However, many believe the sterling-euro gap could widen even further. Some experts believe that by July, one pound could buy up to €1.55 - a 13-year high. So sitting back and seeing what happens in the next few weeks could pay dividends.

Belfast Telegraph


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