Peter Barry
Question:46 Mr. Barry asked the Minister for Industry and Commerce if he proposes to take any action to help small and medium sized companies cope with the effects of the UK Government's decision to leave the Exchange Rate Mechanism.
Written Answers. - Exchange Rate Mechanism.
Peter Barry
Question:47 Mr. Barry asked the Minister for Industry and Commerce the investigations which have been conducted by his Department to assess the effects on (1) employment (2) investment and (3) exports, of the decision by the UK Government to leave the Exchange Rate Mechanism.
Ruairí Quinn
Question:48 Mr. Quinn asked the Minister for Industry and Commerce if he will make a statement on the measures taken within, and by, his Department to assist exporters to the sterling area, in view of the changes in the value of sterling and the difficulties they face as a result.
Brendan Howlin
Question:55 Mr. Howlin asked the Minister for Industry and Commerce if any special or particular initiatives to assist Irish industries engaged in exporting to the UK have been taken, consequent on the relative revaluation of the Irish pound; and if he will make a statement on the matter.
Eamon Gilmore
Question:57 Mr. Gilmore asked the Minister for Industry and Commerce the implications for Irish industry, and particularly for job creation, of the recent decline in the value of sterling against the Irish pound and the 3 per cent increase in interest rates; if he has any plans to assist industry in coping with the difficulties created by the increase; and if he will make a statement on the matter.
Ruairí Quinn
Question:81 Mr. Quinn asked the Minister for Industry and Commerce if he will outline the measures he intends to introduce to alleviate the impact of recent currency changes upon indigenous Irish companies trading in the sterling area; and if he will make a statement on the matter.
Peter Barry
Question:103 Mr. Barry asked the Minister for Industry and Commerce the assistance it is proposed to give to industries affected by the exchange rate re-alignment between the pound and sterling.
I propose to take Questions Nos. 46, 47, 48, 55, 57, 81 and 103 together.
The recent dramatic fall in the value of sterling, coupled with the ongoing turbulance in the currency markets, has created serious difficulties for a number of Irish firms. On Thursday 24 September 1992 I asked my Department to undertake, as a matter of urgency, a detailed analysis of the problem. Subsequently, on 29 September 1992, the Government decided to establish a working group, under the chairmanship of my Department, and representative also of the Departments of Finance, Agriculture and Food and the Marine, and semi-State Bodies as appropriate, to look at the nature and content of the problems arising for firms as a result of the decline in the value of sterling and to make recommendations as soon as possible.
The working group's report was considered by the Government yesterday.
The working group concluded that many manufacturing firms face serious difficulties in maintaining positive margins on sales in the UK market and in those parts of the domestic market and certain major overseas markets which are subject to strong price competition from UK firms.
These problems are not confined to specific sectors; firms in all sectors of industry have suffered immediate erosion of margins arising from the devaluation of sterling. However, the sectors which are most badly affected are: clothing, food products, small engineering firms, furniture and joinery, building products, saw-mills and firms which sell intermediate products.
In general the working group concluded that the firms under greatest pressure have some or all of the following main characteristics:
—a high level of exports to UK,
—a high level of exposure to competition from UK competitors,
—low levels of input purchases (e.g. raw materials) from the UK
—low margins,
—high gearing,
—high level of debtor exposure and,
—little or no forward currency cover.
The Government have carefully considered the report of the working group. They have decided to immediately establish a Market Development Fund of £50 million for the period up to the end of March 1993 to assist firms which have been seriously affected by the recent turmoil in exchange rates.
By helping firms to help themselves the Fund will also contribute to the achievement of the stability necessary to maintain Ireland's membership of the Exchange Rate Mechanism at a time of considerable uncertainty.
The Fund will be administered by a special Management Team drawn from the relevant State bodies. The establishment and management of the Fund will be supervised and directed by a Management Board which will comprise the Managing Directors/Chief Executives of ABT, FAS and IDA together with representatives from the Departments of Agriculture and Food, Finance, Industry and Commerce, Labour and the Marine, and a representative from the industry/employer bodies and ICTU. In establishing the Fund, the Government emphasised that assistance would be directed very specifically at firms which would have temporary difficulty in maintaining employment and in adjusting to the recent fundamental changes in the market place arising from the devaluation of sterling. Firms will need to demonstrate the ability, commitment and actions being taken to manage their way out of current difficulties. Operational criteria for support under the Fund will be worked out in the next few days. These will concentrate on providing help for firms whose profitability and employment is threatened because of the devaluation of sterling. It is not intended as a permanent subsidy; it will be available only to enable firms to make the changes necessary following the sudden currency changes of recent weeks. There will be a formal review of the operation of the Fund at the end of this year.
The Management Team is meeting today to finalise all the practical details for support from the Fund. I would advise firms to contact An Bord Tráchtála (ABT) or the IDA through their central and regional offices. An Bord Tráchtála has installed a special Help Line — number - 1-800-424242.