U.K. Exporters Not Sure How Long Exchange-Rate Boost Will LastBy
Manufacturers say inflation, pound movements are concerning
Firms currently enjoying continued access to single market
U.K. exporters are still reaping the benefits of a weaker pound, but they’re not sure how long the boost will continue as the country gets closer to withdrawing from the European Union.
The British Chambers of Commerce’s trade confidence index fell in the second quarter, according to a report published Thursday. It still stands at the third-highest level on record, though producers voiced concern that the exchange rate, inflation and recruitment may hurt business in the future.
“Many manufacturers are capitalizing on the advantages the fall in sterling has brought to overseas sellers since the EU referendum,” said Adam Marshall, BCC director general. “That said, exporters also tend to import raw materials and product components, and are concerned that the sustained depreciation of the pound may erode their margins.”
In a survey of over 3,500 businesses, the BCC and courier company DHL found that 68 percent of exporters are worried about the currency. Over a third of them are concerned about inflation, and nearly 40 percent of them expect the price of their products to increase in the coming months, mainly due to pressure from the cost of raw materials.
The Bank of England expects exports and investment to at least partially offset the slowdown in consumer spending brought on by the pound’s fall since the referendum to leave the EU last year. The BCC expects that U.K. exports will grow by 3.1 percent in 2017 and 2.9 percent in 2018.
The central bank’s Deputy Governor Ben Broadbent has said that exporters are enjoying a “sweet spot,” as sterling’s depreciation boosts competitiveness and firms enjoy continued access to the single market. That’s ultimately set to change with Theresa May’s pledge to take Britain out of the customs union and strike a free trade deal with the bloc.