“Letterkenny loves sterling – if you’ve got sterling, we want you. Shop LK is a giveaway – for sterling!”
That was the radio slogan deployed by Letterkenny, a town about a 25-minute drive from the Border that divides the island of Ireland, as it sought to lure UK shoppers south last year.
At that point, one pound bought €1.40. Now, as it buys about €1.12, the pound has lost its luster, making Letterkenny a little less attractive. Some outlets are even offering pound-euro parity already.
“We were singing from the rooftop about the exchange rate,” Toni Forrester, who runs the Letterkenny Chamber of Commerce, said. “We won’t be doing that this year.”
An estimated 30,000 people a day cross the Border. While earlier shoppers may have headed south to Letterkenny, now retailers are reporting a surge into Northern Ireland after the UK’s vote to exit the European Union sent sterling plunging and boosted the spending power of the euro.
Irish shoppers
From July to September, the number of Irish-registered cars visiting the Buttercrane Centre in Newry, in Northern Ireland, rose 62 per cent from the year-earlier period, according to its manager Peter Murray. The centre is home to more than 50 stores including lingerie retailer Ann Summers and JD Sports.
“There has been a significant increase in shoppers coming from the Republic,” said Murray. “It kicked in in early July after the referendum and the drop in sterling.”
Sterling has fallen 14 per cent against the euro since the referendum in June. Even after the slide, the currency is about 1.1 per cent overvalued against the euro, according to the OECD’s measure of purchasing power parity. It was more than 18 per cent overvalued at the end of 2015, the gauge showed.
For Ireland, the drop in the pound poses wide challenges. The country’s companies are starting to feel the pain. On Tuesday, Dublin-based Ryanair Holdings Plc cut its 2017 net profit outlook by 5 per cent, citing the post-Brexit drop in the pound.
The UK is Ireland’s biggest single trading partner in Europe, and the government last week trimmed its economic growth forecasts on the back of Brexit concerns, in part because of people like former currency trader Stephen Egan.
Dublin accents
Egan now runs a cafe in Dundalk, on the other side of the Border from Newry. He says he now pops across to buy the ingredients for his wife’s favorite tipple, the Negroni cocktail, made of gin, vermouth and Campari. The combined costof buying a litre of each is £33 pounds, or £36, compared with as much as €70 in the South, Egan said.
While Northern Ireland is traditionally cheaper than the South, the plunge in sterling now more than offsets travel costs involved in heading across the Border.
“When I go up there, I hear a lot of Dublin accents, ” Egan said. “The closer to Christmas, the worse it will get. ”
Outside Salley’s Restaurant, in Aughnacloy just north of the Border, a traditional pit stop for Border travelers, a sign says €1 already buys £1, as it tries to tempt southerners heading to Newry or Belfast for shopping.
Chill winds
It’s easy to see why they would make the journey. On Friday, a men’s wool jumper cost £35 pounds, or €38.75, at Marks & Spencer’s in the North, compared with €47.50 on the company’s Irish website. Nike Air Max sneakers cost £85, or €94, at JD Sports in Newry, against €110 in the South.
Back in Letterkenny, the chill winds of sterling’s decline are already apparent.
“We’ve lost that little bit of extra” demand, Forrester said. “The timing is bad, Christmas is coming, these are a crucial few months. I should say we have had fluctuations before and will have them again. Our biggest concern is not knowing what exactly Brexit will bring.”
– (Bloomberg)
