Retailers near the border can expect a bumper weekend after the pound fell to a record low against the euro for the third consecutive day.
Sterling fell to $1.1238 yesterday — making the euro worth more than 88p — the lowest level since the euro was launched in 1999. At the height of the pound’s strength in October 2000 the euro was worth just 57p.
The latest fall came after a survey from the Confederation of British Industry showed UK manufacturers are expecting the biggest slump in output since 1980.
It follows other negative reports on the economy that have raised expectations the Bank of England will cut rates again next year. The bank has already cut interest rates by 3% since October to a base rate of 2% — the lowest level since 1951 — as it bids to stave off a long recession.
Bank of Ireland NI economist Alan Bridle thinks the exchange rate could fall further.
“With the prospects of even lower interest rates and the UK Government giving at least tacit approval of a weaker exchange rate, the short-term momentum is still to the downside towards 90p, although a fall to parity versus the euro would not be my central expectation. There will come a point when all the ‘bad news’ is discounted in Sterling's value and attention will switch to the deteriorating prospects in the eurozone. I would anticipate some modest rebound for the pound during first quarter 2009, back into a trading range around 85p.
“Northern Ireland is already enjoying the benefits of a weak exchange rate versus the euro in terms of the cross-border shopping phenomenon but the gains for manufacturers are being constrained by falling demand,” he added.
The falling value of the pound, and the recent cut in VAT to 15%, has seen shoppers from the Republic cross the border in record numbers in search of bargains. That has boosted traders in border towns such as Newry and further afield in Belfast and Banbridge.
Banbridge’s The Outlet shopping centre expects a surge in visitors from the Republic in the run-in to Christmas.
Euan Forbes, centre manager at The Outlet said: “The facts are that when the euro is strong we can anticipate an increase in shopper numbers from the Republic of Ireland. For two weeks in a row we have recorded our best ever sales figures and it is no coincidence that this correlates with the fact that 55% of our weekend trade is originating from the Republic of Ireland. ”
Glyn Roberts, Northern Ireland Independent Retail Trade Association chief executive, said small retailers in border towns are also enjoying increased trade but urged caution.
“While clearly it is welcomed that so many shoppers from across the border are coming north, we should not rely on this trade lasting as economic circumstances will clearly change.”
Northern Ireland Manufacturers chief executive Bryan Gray said the weak pound is a mixed blessing for producers. “A weak pound hurts anyone who’s importing raw materials from the eurozone and helps anyone exporting to there. Unfortunately with the recession spreading, exports are in decline. One group hurting badly is people in construction related products.”