The pound's precipitous drop since the Brexit vote may do more to help the earnings of British exporters than the economy as a whole.
The evidence to date is that firms selling goods abroad are keener on taking the exchange-rate windfall to improve profit margins than they are on increasing their share of foreign markets.
Official figures Friday showed export prices in sterling terms have jumped more than 12 percent over the past year, suggesting many companies are simply maintaining their foreign-currency prices instead of seeking to sharpen their competitive edge by allowing them to fall.
That's good news for shareholders, as fatter profits allow companies to increase dividend payments. The pound's 16 percent drop since June's vote to leave the European Union largely explains the stellar stock-market performance of companies with a high foreign-exchange exposure, as this chart shows:
It's less good for an economy whose main pillar — consumer spending — is coming under mounting pressure as accelerating inflation erodes personal incomes.
Net trade — the effect changes in the trade deficit have on economic output — is expected to start contributing to the expansion this year, but perhaps to a lesser extent than had been hoped.
Oxford Economics sees GDP growth slowing to 1.6 percent this year and 1.3 percent in 2018, with net trade accounting for 0.3 percentage point and 0.5 point respectively. It hasn't made a positive annual contribution to growth since 2011.
So are companies missing an opportunity? Their reluctance to cut prices is not without justification. The flipside of a falling pound is that imported raw materials are getting more expensive, and fast. Figures next week are expected to show input prices rising by almost 19 percent over the past year. Exporters may also be fearful of cutting prices in case sterling rebounds.
Yet Oxford Economics sees little prospect of the U.K. currency strengthening. In a report this week, the research group predicted the pound will remain weak, particularly against the dollar, as the Bank of England maintains a relatively loose monetary policy.
"This should give exporters more confidence that the competitiveness gains from a cheap pound will last and hence more incentive to reduce foreign-currency prices and expand market share abroad," economists Martin Beck and Andrew Goodwin wrote.