Pound rout spells fresh headache for Irish exporters

Irish exporters are facing mounting pressure as continued Brexit uncertainty and an increasingly unstable UK government battered sterling, with analysts predicting it could plunge further.

The rapidly unfolding Brexit crisis also hammered Irish shares, leaving top tier constituents including Ryanair and Bank of Ireland deeply in the red.

Ireland’s Iseq Overall Index suffered the ignominy of being the worst performer in Europe yesterday, as investors fled shares likely to be most impacted if the UK government and embattled Prime Minister Theresa May can’t get the Brexit deal across the line.

Brexiteers fear that the UK government will be handing too many concessions to Brussels, while Remainers want another referendum.

The key resignation of Brexit Secretary Dominic Raab yesterday morning gave sterling the first real pummelling of the day, while the prospect of a leadership challenge cast further doubt over the UK’s future relationship with the EU. The Irish share index had plunged more than 3.8pc by the end of the session, with shares in Ryanair having sank more than 6.5pc and Bank of Ireland down 7.8pc. A slew of other companies were dragged into the maelstrom, with housebuilder Cairn Homes, packaging giant Smurfit Kappa and building materials giant CRH all seeing steep declines.

Sterling tumbled as much as 2pc against the euro. It was the steepest decline for the pound since 2017. ING bank predicted yesterday that sterling could fall by another 3pc to 4pc as investors will be able to demand greater risk premia for UK assets. “Until there is some clarity on a leadership challenge, there is a risk that we end up with a more Brexit-leaning leader,” said ING.

“Such an outcome would increase the chances of a ‘no deal’, on the assumption that a new leader would be unlikely to secure any further concessions from Brussels.”

ING said that with a leadership challenge, sterling could drop to 91p per euro. Yesterday, the euro was worth 88.7p.

In London, shares in Ulster Bank parent Royal Bank of Scotland fell more than 10pc at one stage as speculation mounted that a UK general election now would open the possibility that the state-controlled lender may face an uncertain future under a left-leaning Labour government led by Jeremy Corbyn.

Shares of other Irish firms with sole listings in London were also hit. Grafton Group, the company that owns Woodie’s DIY in Ireland but generates the majority of its revenue and profit in the UK, fell 3.5pc. Shares in DCC, the diversified sales to marketing and distribution group, fell 2.8pc.

Markets had priced in some opposition to the draft Brexit deal negotiated by Theresa May, but the latest round of resignations unleashed a fresh wave of volatility that sent investors to the relative safety of government debt.

British financial regulators contacted major banks asking for feedback on market conditions because of sharp falls in the pound, sources said.