Currency caution

Research from the Globalisation and Economic Policy Centre at Nottingham University has put hopes that the plunging value of the pound may boost UK exports into doubt.


Research from the Globalisation and Economic Policy Centre at Nottingham University has put hopes that the plunging value of the pound may boost UK exports into doubt.



It challenges expectations that UK firms might increase overseas sales thanks to sterling’s recent plunge to a two-year low against the Euro.



Following the largest-ever study of its kind into currency movements, the research shows the sinking pound might have almost no effect whatsoever on the UK’s manufacturing exports.



A team of academics studied the exchange-rate movements and export patterns of more than 23,000 UK manufacturing firms over a 17-year period up to 2004.



They found shifts in rates had only a modest impact on total manufacturing exports, mainly among domestic companies.



Multinationals’ export levels were not affected at all – and currency movements did not influence firms’ decisions on entering or leaving a market.



Dr Richard Kneller, one of the report’s authors, said: ‘When sterling was very strong you heard people arguing that was why we had such a large trade gap.



‘But the drop in the pound now is not going to persuade British manufacturers to get out their foreign phrasebooks and start trying to sell overseas.



‘You would expect a strong pound to be bad for exports and a weak pound to lead to much greater exports, but this research paints a different picture – not helped by the fact that economies in Britain’s main export market, Europe, are also struggling.’


The Globalisation and Economic Policy Centre studies the effects of globalisation and economic policy.