The machine tool industry has warned that the value of sterling must fall to at least DM2.60 for it to be competitive.
Malcolm Taylor, president of the Machine Tool Technologies Association, told the small firms minister, Barbara Roche, at the EMO exhibition in Hanover that he believed the pound could be `talked down’.
Roche said the Government was very aware of the industry’s concerns, but long-term stability was the overriding priority.
MTTA statistician Geoff Noon said UK machine tool exports were down 4% year on year in the first quarter of 1997, but that the full effects on profits and investment `may not be seen till 1998′.
Only against European currencies was the pound stronger than when sterling left the European exchange rate mechanism, said Noon. The trade weighted index for sterling’s value against a basket of currencies was forecast to depreciate only slightly over the next year, from 104.5 now, on a scale where 100 represented the value just before leaving the ERM, to between 101 and 94.7 in a year’s time.
Taylor said: `The largest problem the industry has found for many years is the shift in the exchange rate against the German mark. It is unrealistic for the industry to change at the speed at which sterling changes.
`At a rate of DM2.22 we were doing extremely well taking market share in Germany and Europe. I believe we can trade competitively at DM2.55-2.60.
`I agree with the minister about long-term stability, but I believe sterling could be talked down. You have to survive in the short term.’
John Bloxham, managing director of Cincinnati Milacron, agreed `a rate of DM2.50-2.60 would be more acceptable’.