Fears for Irish businesses as Britain heads for year-long recession
Of England Will That In Britain Picture: Warned Pa Bank 13% Inflation The Has Reach
Irish food and agri-businesses are bracing themselves for the impact of a year-long recession in Britain, which represents 30% of their export market.
In its bleakest assessment for over a decade, the Bank of England not only warned the downturn there will last a year, but that inflation will spike to over 13% in the coming months.
Fears that the British economy is heading into some sort of contraction due to its severe cost-of-living crisis had been widely flagged. However, the latest assessment by the Bank of England was if anything bleaker than anticipated, economists said.
At present, the dire financial situation in Britain is in sharp contrast to what is happening in Ireland, with the latest Exchequer figures here showing a surplus of €5bn in July compared to a deficit of €5.7bn this time last year.
Furthermore, the Central Statistics Office has reported the overall seasonally adjusted unemployment rate at a 21-year low of 4.2% in July.
However, Irish experts now warn that the gloom enveloping the British economy will hit small exporters such as the agri-food companies here, and the thousands of jobs that depend on those small firms selling their goods across the Irish Sea.
Gerard Brady, chief economist at business group Ibec, said that despite diversifying, the UK still represents about 30% of the export market for indigenous firms, and that those small exporting companies are “jobs-rich” and have spread employment across the four corners of the country.
Mr Brady said the Bank of England report shows the challenges that face SMEs out of Ireland selling into Britain, as it faces “13% inflation, a long recession, and interest rates that will continue basically until inflation comes down”.
“It is a very bleak outlook for the UK economy,” the chief economist said.
Ibec still predicts that the economy in the Republic will avoid recession because the economy went into the Covid crisis in much better shape than Britain’s, and has “a little more fire power” to weather the cost-of-living crisis.
Brian Keegan, director of public affairs at Chartered Accountants Ireland, said there are undoubtedly challenges coming down the line for Irish companies as the European Central Bank hikes interest rates, but he was reassured that this week's exchequer returns showed the robustness of the economy as it faces the cost-of-living crisis.
In warning that the economic clouds are darkening, the Bank of England report predicted UK inflation will stay elevated, and the economic downturn will extend through next year and 2024. The outlook is based on average energy bills increasing there by 75% to around £3,500 (€4,150) in October.
However, here in Ireland Taoiseach Micheál Martin said the positive exchequer figures announced this week will allow the Government to do more to help Irish households deal with the cost of living crisis, which has partly been driven by surging energy prices.
Speaking in west Kerry Mr Martin said: “It’s good that the revenues have remained strong this year notwithstanding challenges in terms of the cost of living overall internationally.
“Revenues are increasing, so Government plans are basically a comprehensive budget to deal with the medium to longer term framework, and that will also have cost focus in terms of tax relief and also how can we reduce costs for families.
This is to alleviate the pressures “that are undoubtedly there, on many households across the country,” he added.