Consequences of foot-and-mouth reach far beyond stricken farms

The foot-and-mouth outbreak in Co Louth is the stuff of nightmare

The foot-and-mouth outbreak in Co Louth is the stuff of nightmare. With a fully fledged epidemic worsening daily in Britain and the wholesale slaughter of healthy and sick livestock under way, confirmation that the virus had struck in the Republic was news no one wanted to hear. And just one day into a crisis that could last for months, it was too early to tell what its overall economic impact would be.

It is clear that its consequences will reach far beyond the exclusion and surveillance zones around stricken farms in Co Louth and Co Armagh.

Even before the outbreak at a farm in Proleek, Co Louth, was confirmed, the Irish Tourist Industry Confederation estimated the scare had cost already £223 million in its sector. That scare is now a reality. So no matter what steps are taken now to prevent the disease spreading, an epidemic is a greater possibility today than it was last weekend, when the Government relaxed measures designed to combat the virus.

If it spreads - and there is a high risk of that - those in the farming and the food industries would bear most of the cost. Yet others would pay too, be they in the haulage business or suppliers of services to farms and the tourism sector. With fears of recession in the US prompting interest rate cuts and profit warnings in the information technology sector that has significant interests here, such pressure is unwelcome.

READ MORE

Still, analysts say the crisis should be seen in the context of the State's speedy economic growth, by far the EU's fastest.

In the background lies a dependence on agriculture that is far greater than elsewhere in the EU, although it has diminished in the modernisation of the economy. Agriculture, forestry and fishing accounted for about 17.3 per cent of gross domestic product in 1969, according to the Central Statistics Office. In 1999 it accounted for only 4.2 per cent.

In the same time frame, of course, tourism and related sectors have increased in economic significance. So how exposed is the Republic?

A crucial factor, but one difficult to measure, is confidence abroad in Irish goods. The Republic's agriculture industry is highly dependent on exports. The chief economist at NCB Stockbrokers, Mr Dermot O'Brien, said Irish farmers produce 11 times more beef and veal than the domestic market needed and nine times as much butter.

Thus, the EU export bans on meat and dairy products show that foot-and-mouth is bad news indeed. In addition, Irish food producers gained something of an advantage in the British market in the weeks since the disease struck there. The opposite can now be expected - and in markets beyond Britain.

At home, economic confidence boils down to willingness to spend money. People spend less when sporting, cultural and social events are cancelled and travel discouraged.

Citing the tourism industry figures, Mr O'Brien said: "While the threat is there, the damage to tourism is there even if an epidemic doesn't hit."

As against 11 per cent gross domestic demand growth last year, Mr O'Brien said an epidemic could take 0.75-1 percentage point from likely growth this year of 8 per cent. The reduction to 8 per cent from 11 per cent reflected knock-ons from slower growth in the US, he said.

Similarly, the head of research at Goodbody Stockbrokers, Mr Colin Hunt, said a major epidemic could reduce growth in Gross National Product this year to 6.3 per cent from 7.7 per cent.

Such a diminution would take account of "ill-wind" from a US recession, but its impact would take months to seep through the economy.

Said Mr Hunt: "The hope and belief are that the disease can be contained within the exclusion zone. If it doesn't it is going to take six to seven months from the date of the last outbreak to stamp it out."

He said falling income from agriculture and tourism would be offset by tax cuts in last December's Budget, which will feed money back into the economy next month.

Mr O'Brien said a 10 per cent slaughter of Irish herds could see 650,000 cattle, 500,000 sheep and 170,000 pigs culled.

While this was at the high end of possibilities, and a rough estimate only, such a development would leave food industry workers laid off. The agriculture and food sector employs about 160,000 people, slightly in excess of 8 per cent of total employment in the economy. Mr O'Brien said a 10 per cent cull could result in a similar share of food processing jobs being lost, but he stressed that was an extreme example.

No one could tell what the true extent of an epidemic would be because the disease was only in its early phase. "I don't think it has the capacity to derail the whole economy. In terms of your starting point, 8.5 per cent growth in Gross Domestic Product is already very high." He said any layoffs had to seen against a backdrop of virtual full-employment and fewer people than ever signing on.

Citing fears of overheating in the economy, Mr Hunt said: "There were people worrying that the Irish economy was going far too fast, that it was going to implode. If you follow that logic, which I didn't, there are grounds on which can find a silver lining in this particular cloud."

That, of course, would be of little comfort to farmers faced with a remorseless and resilient disease and, most likely, months of uncertainty.

Individual tales of woe lie behind every statistic recounting the progress of the virus, the cull of animals, and lives disrupted in the struggle to contain it.

Arthur Beesley is a finance reporter with The Irish Times