Between Brexit, Sterling Weakening and British Exports
A recent survey states that there is only one in five Britons who stick to their stand to continue to join the European Union.
Nearly a year after the Brexit referendum, a survey shows that of the total Britons who used to choose to remain in the European Union, only half remain in their stance. The rest said they accepted the decision that Britain must leave the European Union.
Now only 22 percent of voters say they do not support Brexit and believe that the British government must ignore the results of the referendum and find ways to cancel it. This figure dropped far from the amount previously obtained, when the referendum was held, which was 48%.
Now about 68% of voters say they support the government’s move out of the European Union and 23% of them are people who used to oppose Brexit.
Weakening Sterling Advantages Exporter?
The pound is still in a downtrend since the results of the referendum stated that the British people opted out of the European Union.
British exporters are those who rejoice over the weakening of the pound, because the weakening has raised the value of their export goods sales by 15 percent since a year ago. There is hope that an increase in the manufacturing sector will help balance the UK economy which has so far depended on domestic demand.
But Gordon Macrae, senior manager at Sheffield-based Gripple, whose 85 percent of customers are outside the UK, is not too optimistic that this increase will last long despite high demand for their products.
“My honest view is that the government is rather fantasizing that there are great opportunities for companies with sterling exchange rates today,” Macrae said at the Griffle plant in Sheffield.
Brexit supporters argue that the weakening of the pound will stimulate exports and investment, while pro-Brexit newspapers have taken advantage of improved export data to publicize Britain’s export boom ahead of the June 8 election.
Concerns about Increasing Production Costs and Bureaucracy
The Bank of England predicts export growth will exceed domestic consumption this year as inflation rises – which is also due to weakening currency exchange rates. But Macrae argues that Gripple, whose consumers prefer to make payments using their own currency, is wary of weakening sterling as a tool to compete in price. According to Macrae, raising prices is the worst thing in maintaining long-term relationships with consumers.
One of the things that is worried about Brexit is the increase in production costs, especially if there is a delay in customs so that it affects the ability of producers to import the raw materials needed. Not to mention the possibility of delays in the delivery of goods from abroad.
At present, although British goods exports have increased by 15 percent since last year, the number of goods sold has barely increased. The last time there was a big difference between the two components was when there was a global financial crisis, when sterling also collapsed but the export volume was unable to improve. The weakening of the global economy has become one of the explanations, but the key is that the European Union has not increased.
It is possible that there is a time lag between the fall of sterling and an increase in production by exporters. But history shows that this is almost impossible. British exports tend not to respond too much to sterling’s weakness. Not only in 2008 but also in 1992 when Britain abolished the fixed exchange rate of the pound against the German mark.
Last March, Bank of England deputy governor Ben Broadbent said that uncertainty created by Brexit might hold exporters’ steps to long-term investments even though the current profit level was quite tempting.