New analysis of more than 2,100 transactions made through foreign exchange specialist, Fexco Corporate Payments, reveals firms spent 240% more on UK goods and services by the end of May this year, compared with the first five months of 2016.
In addition, the amount spent in the first five months of this year was 31% higher than that recorded during the same period last year, and while this is less than the 152% jump recorded between 2016 and 2017, Fexco said it is a clear sign Irish firms are ramping up their import boom.
Irish firms are also 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 five months of 2016 to €15,211 in the first five months of 2018.
The primary driver behind such a sustained increase in imports is likely to be a desire to capitalise on the weak Pound. Despite recovering slightly from its low last August, during the first five months of 2018 one Euro was worth an average of 87.8p, compared to an average of 77.7p between January and May 2016.
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However cost pressures continue to have an impact, with a global study by industry consultant Turner & Townsend finding Dublin to be the sixth most expensive city in the world for builders.
The study also estimates that a shortage of skilled labour would drive up construction costs in Dublin by a further 7% during this year.
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."
(LM/MH)
