Irish construction firms more than doubled their spending on imports from the UK during the first five months of 2017 compared with the same time in 2016, according to data released by the foreign exchange specialist FEXCO Corporate Payments.
The analysis, of more than 1300 transactions made through FEXCO Corporate Payments*, shows that by the end of May Irish building firms had spent 152% more on UK goods and services than they did in the first five months of 2016.
The figures also reveal that Irish construction firms are importing from the UK more frequently – the number of transactions rose by 13.5% – and that the average transaction size more than doubled from €5,729 in the first five months of 2016 to €12, 382 in the first five months of 2017.
The primary driver behind the spike in imports is likely to be Irish builders’ desire to capitalise on the weak Pound. Though sterling has recovered a little since its abrupt drop in the wake of the Brexit referendum, during the first five months of 2017 one Euro was worth an average of 85.7p, compared to an average of 77.7p between January and May 2016.
Yet cost pressures closer to home are likely to be a factor too. A global study** published in May by the construction consultancy Turner & Townsend found that Dublin is now the eighth most expensive city in the world for builders. It predicted that a shortage of skilled labour would drive up construction costs in the capital by a further 8% during the next year.
David Lamb, head of dealing at FEXCO Corporate Payments, explained: “Irish construction is booming once again – with demand for both commercial and residential property exceeding supply. Buoyed by rising confidence, Irish building firms are understandably cashing in on sterling’s weakness by snapping up imports from the UK.
“But the tactic is likely to be about more than just opportunism. Compared to this time last year, British goods and services are a bargain for Irish builders – but also an attractive way to offset rising cost pressures at home.
“With Ireland’s skills shortage likely to force up construction sector wage bills in coming months, consistently cheap imports could prove a vital safety valve for Ireland’s builders as the market heats up further.
“But with the Pound still subject to a high degree of volatility as the UK prepares for a general election and the start of Brexit negotiations proper, Irish builders who import regularly from Britain should consider locking in the current favourable exchange rate by using a forward contract.”
