Tesco Ireland and the impact of exchange rates

A frequent trivia question: which is the nearest foreign country to Britain? The answer of course is the Republic of Ireland, which is quite literally walking distance from the UK. Ireland uses the Euro as its currency, which is a big deal for businesses on either side of the border. Shoppers can readily shop in either Britain or spend five minutes in the car to be in Ireland, or vice versa.

A nice story on the BBC website shows how Tesco has cut prices by up to 25% at 11 stores in the Republic of Ireland near the border with Northern Ireland. The supermarket said it wanted to narrow the price gap to keep shoppers at its outlets in the Republic.

The weakness of the pound against the Euro has seen a stream of Irish shoppers head north. The plunging value of sterling has made the UK seem far cheaper than the Republic. Shoppers have been flooding into Sainsbury’s and Asda stores on the UK side of border areas. The Asda store in Enniskillen, County Fermanagh, had 60% of its customers in one month come from the Irish Republic and is the sixth busiest store in the global Wal-Mart chain.

Tesco shut down 11 stores in the Irish border counties to restock with goods sourced from the UK. Tesco Ireland chief executive is quoted as saying: “This substantial investment will enable us to compete in the long term with prices north of the border and will remove the incentive or the need for consumers to travel, which has been bad for jobs, for local economies and the national (Irish) economy”.