Ireland’s booming construction industry continues to ramp up imports from the UK but the speed of growth is dwindling, according to data published by Fexco Corporate Payments
The analysis, of more than 4,000 transactions made through Fexco Corporate Payments, reveals that in the 12 months to February this year Irish building firms spent 17% more on UK goods and services than they did in the previous year.
The number of transactions made increased by 7% and the average transaction size rose by 7.5%, from €4,902 to €5,269. The average purchase size is now two-thirds bigger (66.8%) than the €3,159 recorded in the 12 months prior to February 2017.
While Irish builders continue to spend more, and more frequently, on imports from the UK, the spike in spending seen in the aftermath of the UK’s 2016 Brexit vote has eased. Total spending has risen by 128% in the past three years, but the 17% uptick recorded in the last year is less than a fifth of the scale of the 95% jump seen between the twelve months prior to February 2017 and the following year.
Though the import boom is cooling, Ireland’s construction industry remains strong. A recent survey of Irish building firms by the building consultancy Aecom discovered more than three quarters expect their business to grow in 2019, and forecast that total output would increase by 20% over the year.
By contrast, the UK construction industry is stagnating. British government statistics show sector output rose by just 0.7% in 2018, the slowest pace for six years.
David Lamb, head of dealing at Fexco Corporate Payments, commented: “The cooling of Irish builders’ appetite for UK imports is likely to be driven by two factors; a modest strengthening of sterling – which has risen by 4% against the Euro since the start of 2019 – and a greater willingness to import materials from other EU countries.
“If Britain leaves the EU without a trade deal, Irish imports of construction materials from the UK would be subject to WTO tariffs of up to 6%, so clearly it makes sense to investigate alternative supply chains.
“However the UK’s proximity and the ease of buying from British suppliers means it remains the number one source of imports for Ireland’s booming construction industry.
“Even with sterling’s rally this year, a Euro is still worth 11% more against the Pound than it was on the eve of the UK’s Brexit referendum, making British imports an attractive way to mitigate the cost pressure of rising wage bills at home.
“With the UK Parliament taking a series of votes this week that will determine the course of Brexit, the exchange rate is likely to face extreme volatility, so Irish builders who import regularly from Britain should consider locking in the current favourable exchange rate by using a forward contract.”
