Tuesday, March 9, 2010

What a waste of a weak pound…

U.K. Trade Gap Swells to Widest Since August 2008

The goods-trade gap was 8 billion pounds ($12 billion), the most since August 2008, the Office for National Statistics said today in London. The median of 17 forecasts in a Bloomberg News survey was for the deficit to narrow to 7 billion pounds. Imports fell 1.6 percent and exports dropped 6.9 percent.

Posted by mrflibble @ 10:00 AM (1981 views)
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12 thoughts on “What a waste of a weak pound…

  • So we’ve got the lowest interest rates in history and house prices are falling, and the £ is on its @rse and exports are falling… where to from here?

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  • It is not that simple: It is not like devalue your currency today and tommorow you will start exporting and manufacturing. Let’s not forget that we do a lot of assambly and buy raw materials in USD and after try to export.

    A weak pound so far has affected the profitability of British companies and proably would not have not helped at all.

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  • Only in the UK do we think a weak currency means exports will boom.

    Noone thinks: “who the hell is goign to buy my goods from abroad?”

    It’s as if an insatiable world awaits us at the port of Dover or Southampton and that millions of consumers have the money and can’t wait to buy our goods.

    It’s laughable that “analysts” talk about the snow preventing trade. It’s as if I’ve bought a couple of boxes of spuds for the corner shop and now because all of the village is at home because they can’t drice, I couldn’t sell them.

    We must look beyond this little island and village shop-keeper mindset!!

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  • mander said…A weak pound so far has affected the profitability of British companies and proably would not
    have not helped at all.

    You are dead correct there, the prices of components, material, power and labour, all mostly imported these days
    have all increased to the point that has caused manufactured good be too expensive. So we import finished products
    as they are cheaper to retail.

    Increasing taxation and national Insurance contributions will compound the problems.

    The UK and Sterling sovereinty is between the Rock and the Hard Place with no escape.

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  • Dont worry all part of the miracle economy…all we need is for house prices to rise in March and everything will be fine.

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  • mark wadsworth says:

    Mander, you are referring, I think, tothe “J-curve”.

    But trade deficits are all part of the overall Home-Owner-Ist economic strategy. Instead of working to create wealth and only borrowing money to invest in increasing our productive capacity, we are borrowing ever larger amounts of money to buy the same old houses from each other, and those further up the chain realise they can make more money from house price rises and MEWing than from working so why should they bother? This inevitably sucks in imports (you have to spend your money on something).

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  • A hilarious comment from the BBC version of this story (which I assume someone will put up):

    “The ONS said there was no obvious reason for the deteriorating picture, although some have suggested that the particularly bad weather in January may have disrupted trade flows.”

    So… the shortage of grit meant that tough decisions had to be made such as which side of the road to and from Dover we should treat. Whoever this “some” is that the Beeb are consulting I would limit their input from the hereon.

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  • Mark,

    I agree Home-Owner-Ist economic strategy worked so far producing economic figures but to sacrifice the Pound hopping to become manufacturers scares me even more. I honestly believe that there is overproduction around the globe and the only thing we will manufacture (in China obviously) is going to be a product that we hold a patent for… other than that do not bother cause we can get it almost for free from China or India.

    And to conclude I do not believe in countries specialising in certain economic areas because people will not necessary get born with a genius for finance or so. Diversify in order to survive.

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  • Mander, bit confused by your comment @2. I appreciate we may have to pay more to import raw materials, but if we are assembling here and then exporting, then the only way a weaker pound would reduce margin is if someone was selling finished goods for less than the cost of raw materials… A weaker pound can only make things we sell overseas more attractive.

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  • timmy t,

    In the way that the ingredients needed to manufacture a product come from all over the world where we pay in USD. This means higher costs and we will sell for same price in pounds that will translate into fewer profits.

    Exported UK services only could have benefited from a weak pound but I have doubts with regards to exported products.

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  • Mander – I get the maths – I was working on the assumption that finished goods were sold in currencies other than £. It’s an interesting point – who makes the decision about what currency these deals are done in? I know very little about manufacturing (as you can tell…).

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  • The pound is actually higher today than it was 12 months ago.

    March 2009

    £ to US$ 1.37
    £ to Euro 1.08

    Also, many of our main exports are more price inelastic than basic commodities (Pharmaceuticals and financial services)

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