Irish construction firms have more than tripled their spending on imports from the UK compared to pre-referendum levels, according to data released by the foreign exchange specialist Fexco Corporate Payments.
The analysis, of more than 2,100 transactions made through Fexco, shows that by the end of May this year Irish building firms had spent 240% more on UK goods and services than they did in the first 5 months of 2016 – before the EU referendum.
The amount spent in the first five months of 2018 was 31% higher than that recorded during the same period in 2017. While this is less than the 152% jump recorded between 2016 and 2017, it’s a clear sign that Irish construction firms are ramping up their import boom.
The figures also reveal that Irish construction firms are importing more – and more frequently – from the UK. The number of transactions rose by 22% between 2016 and 2018, and the average transaction size has nearly trebled from €5,729 in the first 5 months of 2016, to €15,211 in the first 5 months of 2018.
Capitalising on a weak pound
The likely primary driver behind this sustained increase in imports is Irish builders’ desire to capitalise on the weak Pound. Though sterling has recovered a little since its low point last August, during the first 5 months of 2018 one Euro was worth an average of 87.8p, compared to an average of 77.7p between January and May 2016.
Yet cost pressures closer to home are likely to be a key factor too. A global study published in May by the construction consultancy Turner & Townsend found that Dublin is now the sixth most expensive city in the world for builders.
It predicted that a shortage of skilled labour would drive up construction costs in the Irish capital by a further 7% during 2018 – a rate of inflation more than double that being seen in London, where Brexit uncertainty has had a chilling effect.
David Lamb, head of dealing at FEXCO Corporate Payments, said: “Two years on from the UK’s decision to leave the EU, the construction industry in Britain and Ireland is living a ‘Tale of Two Brexits’.
“Uncertainty over the impact of Brexit on the UK economy has slammed the brakes on Britain’s construction sector, with output falling sharply in 2018. Meanwhile in Ireland the boom times continue to roll, with Irish building firms cashing in on sterling’s weakness by snapping up imports from the UK.
“Yet this tactic is likely to be about more than just opportunism. British goods and services are cheaper for Irish builders than they were this time last year – and a bargain compared to their pre-referendum levels – but switching to an import-led procurement strategy is also a way to offset rising cost pressures at home.
“With booming demand and a shortage of skilled workers driving up construction sector wage bills, many Irish builders are trying to insulate themselves from an overheating market by importing more of the materials they need.
“It’s a smart strategy, but with the Pound still subject to a high degree of volatility as the UK counts down the months to Brexit proper, Irish builders who import regularly from Britain should consider locking in the current favourable exchange rate by using a forward contract.”