Chancellor Gordon Brown must curb the upward track of sterling in his Budget, industry warned this week, or exports will be hit, margins squeezed and imports encouraged.
A spokesman for the Machine Tool Technologies Association said it was worried by the high value of the pound, which was on an upward curve. `We want to see measures in the next Budget to remedy the situation which is creating real problems for our members.’
Although figures published on Monday by the Office of National Statistics show manufacturing output was 2.3% higher in April than the same month last year – and industrial output up 2.2% – last week’s interest rate hike of 0.25% by the Bank of England was condemned by industry.
Alan Armitage, head of economics, Engineering Employers’ Federation, said the move `will be damaging to UK manufacturing which is still suffering fragile demand, particularly overseas. This further increase in base rates is unhelpful; it may prejudice domestic investment and, if the pound strengthens further, exports will suffer.’
West Midlands-based Sterling Tubes, which exports up to 70% of its output, recorded its best two years up to September 1996, but since then the high pound has wiped 15-20% off its sales price, said Bill Good, managing director. It has had to lay off workers at its Chesterfield plant.
Figures released on Monday by Scottish Engineering show export orders across all sectors of the engineering industry in Scotland – except electronics – declined in the three months to June. It is the first fall recorded in two years.
Howard Jordan, chief executive, puts the blame firmly on the pound: `The exchange rate caused margins to be cut and now companies are losing their competitive pricing edge.’
On Tuesday employers’ body the CBI called called on the Government to adopt fiscal, as opposed to monetary, tightening.
By Anthony Gould