A weaker pound will fail to bring much relief to Britain’s chemical industry claimed Malcolm Mitchell, economist at BP Chemicals and chairman of the Chemical Industries Association economics committee.
Speaking at a CIA conference in London last week, he said that sterling still looked expensive at current rates. ‘On a 12-month view I can envisage a rate of around DM2.6,’ he said.
But he forecast that UK growth would be curtailed this year, and that 1999 will offer few positive prospects.
The chemical industry in Britain will miss out on the general economic recovery in Europe this year, which is being driven in part by the industry’s strong association with automotive manufacturing. What’s more, the UK is ahead of Europe on the economic cycle and is expected to hit a period of slower growth during 1998, while the French and German economies are still growing, Mitchell said.
‘In early 1996, chemical production was growing fastest in the UK, albeit at a modest pace of some 2%, while in Germany output was around 6% below the previous year. By the middle of 1997, the positions had been turned through 180 degrees,’ he said.
* Eddie George, Governor of the Bank of England, at the same conference, said the Bank’s hands were tied when it came to helping exporters by addressing the pound. ‘Directing monetary policy to lower exchange rates would accelerate internal demand,’ said George.