UK manufacturing is being hit by a double whammy of record sterling lows against the dollar and all-time highs against the euro, both the Confederation of British Industry and the Engineering Employers’ Federation warned this week.
The currency extremes – which this week saw the pound fall to a 15-year low of 1.40 against the dollar and rise to 1.64 against the euro – are fuelling soaring raw material costs and making finished products more expen-sive in export markets. This is because many raw materials such as oil are priced in US dollars, while at least half the UK’s manufactured goods are sold to eurozone countries.
Stephen Radley, chief economist at the Engineering Employers’ Federation, said: ‘We now have the worst of both worlds. With the pound being low against the dollar raw material costs are higher, and with it being very high against the euro our exports are being made more expensive in overseas markets. This will cause an even bigger squeeze on manufacturing margins.’ The CBI said that if the currency levels continue, exports will begin to slide despite efforts by exporters to keep prices competitive by cutting margins