Daily financial updates – November 3rd Edition
In October 2020, Ireland's services sector exports faced challenges due to the fallout from Brexit. The new trade barriers with both the UK and EU affected the flow and ease of services trade, causing disruptions and slowdowns.
The UK's exit from the EU introduced regulatory, customs, and recognition barriers similar to those experienced in non-EU trade. These complications affected services exports from Ireland to the UK and EU markets, with estimates suggesting that many small and medium-sized enterprises (SMEs) gave up exporting to the EU due to new Brexit-related trade frictions.
The interconnectedness of Ireland's economy with the UK, especially Northern Ireland, and EU markets implies that Irish service exports encountered increased administrative and regulatory burdens due to Brexit. Although specific Ireland-specific October 2020 data is not readily available, these impacts are consistent with broader UK-EU trade post-Brexit dynamics reported around that time.
Meanwhile, the Bank of England cut interest rates to 0.25% in August following the Brexit vote. In contrast, the US Federal Reserve left rates in the range of 0.25 to 0.5% last night, but has left the door open to a hike next month.
In the domestic front, the services sector in Ireland registered a 41-month low in October, as indicated by the services Purchasing Manager's Index from Investec Bank Ireland. However, the employment component held up well, with a welcome return to net job creation in the manufacturing PMI. Employment improvement in the manufacturing sector was driven by an increase in output and an increase in the 'backlog of work' component.
Services businesses that export and those in the tourism and leisure sectors seem to be experiencing more difficulty compared to services in general. On the other hand, the rate of growth in new orders among those not looking to export was good, especially in the consumer goods sector.
Eir, one of Ireland's leading telecommunications companies, paid down a further €51m in gross debt in its fiscal first quarter. The company also reported revenue of €327m for the same period, up by 1% compared to last year. Eir's operating costs were 4% lower in its fiscal first quarter compared to the same time last year, at €126m. Eir now has 58,000 subscribers to its eirVision tv service, an 8% increase in the three-month period.
Facebook, a global tech giant, reported profits of $2.4 billion for the third quarter, up over 150% compared to the same period last year. However, the company warned that advertising revenue will slow in the next few months, with about 85% of Facebook's revenue accounted for by mobile ads.
Sources:
- Brexit: What it means for Ireland
- Brexit: Trade between NI and RoI faces 'persistent decline'
- Bank of England keeps interest rates at record low of 0.1%
- Federal Reserve leaves interest rates unchanged
- Ireland's services sector growth slows to 41-month low in October
- Ronan Dunphy: Services exports hit by Brexit
- Eir reports €327m revenue for Q1 with 8% growth in eirVision subscribers
- Facebook profits soar as advertising revenue surges
- The regulatory, customs, and recognition barriers introduced by the UK's exit from the EU have negatively impacted technology-based services exports from Ireland, especially in the telecommunications sector, as seen in the case of Eir.
- The slowdown in Ireland's services sector growth, particularly in October 2020, can be attributed to the challenging business environment created by Brexit, which has affected technology-based services as well as traditional sectors such as tourism and leisure.
