Are Exports Suffering Due To The Woes Of The Pound?

Posted by Allison on 1 June 2009, 12:44

The pound is a long way from the exchange rates it was commanding less than a year ago.  It used to be thought of as one of the strongest currencies around, but that isn’t such an accurate description of it nowadays.

But we are far more affected by this situation than some people might think.  If you are travelling abroad and you want to convert your pounds into another currency, then you will want to see encouraging figures in the currency converter you are using.  But some people think that if you aren’t going on a foreign holiday there is no real need to worry about what the pound may or may not be doing.

However this couldn’t be further from the truth.  Exports have been suffering as a result of the poor pound, and that has a direct effect on how companies are run in this country.  The current situation has been reported on in various well known newspapers, including the Guardian and the Telegraph.  The story in the Guardian can be read here, while the Telegraph report is here.

The word ‘export’ basically refers to any goods that are sent out of the country to sell elsewhere in the world.  It includes all other countries, and so in the current financial climate it is perhaps not so surprising that British exports are looking a little the worse for wear.

But what effect does this have on the UK?  Well it certainly doesn’t help the situation regarding jobs.  If fewer products are being ordered from the UK and sent abroad, then there is less of a need to produce them in this country.  And of course that means that there could be fewer workers needed to fulfil what orders we are getting.

This is seen as a knock on effect as far as jobs are concerned, and it doesn’t therefore bode well for our unemployment figures.  Some companies are already having to cut back in order to remain in business for the foreseeable future.  It is truly amazing how far reaching the effects of a poor pound can be, both in the short and the long term.

There has been one good result though, and that concerns exports which have gone specifically to other European countries.  Because the Euro has been performing rather well (at least in contrast to the pound), exports to the Eurozone in particular have been quite good of late.  Whether it will continue to be this way remains to be seen.

It’s often the case that you can find a silver lining in any cloud.  But this is a small one compared to the scale of the reduction in exports to the rest of the world.  And it isn’t enough to improve the overall situation. 

At the end of the day we are in the middle of a recession, and it could go on for quite some time yet.  As such we can fully expect job losses and floundering currencies.  It’s just not particularly nice to be experiencing these problems when they occur.

What will be interesting to see is what happens when the pound finally does start to regain a little strength.  It will happen, but what will the effects be as a result?

 

Comment

  1. We all know the pound has had a tough time in recent months – well okay, for more than a year now. But I hadn’t thought of exports being affected by it. You don’t always hear about the depths of the bad news that a poor pound gets us.

    Most of the time the important thing seems to be how the pound is faring when compared to other currencies. But as we can see from this article, this is only really scratching the surface. It obviously pays to explore things in a bit more depth – you can find out a lot more information by doing so.

    — JamieK · Sep 1, 11:33 AM · #

  2. As a regular reader of news reports, currency opinions and so on, I have learned a lot about how the state of the markets can affect all kinds of things. You don’t think everything is connected in this way but it is quite amazing to read about the changes and differences in things!

    I know that when the pound is strong it means importing is cheaper. This is obviously good for UK businesses who are buying stock from overseas. But it makes life harder if you make things here to try and sell to businesses in other countries. It is a balancing act then – not everyone can win all the time. As one side benefits the other side must lose as a result.

    — David · Jul 30, 09:21 PM · #