Belfast Telegraph

Wednesday 17 December 2014

Exports in shipshape after sterling fall

Currency heading for major sell-off following Germany's resurgence

Quay moment: Northern Ireland’s exporters can cash in on weaker pound as goods and services become more competitive. A weaker sterling, however, makes life more difficult for local importers
Quay moment: Northern Ireland’s exporters can cash in on weaker pound as goods and services become more competitive. A weaker sterling, however, makes life more difficult for local importers

Northern Ireland's exporters have been given a boost following a sharp fall in the value of sterling over the last few days to a level not seen since July.

The pound's weakness has been triggered by a resurgence for Germany's economy and experts are warning that the currency is heading for a 'large-scale sell-off".

At the time of writing a euro was worth 86.77 pence but at one stage yesterday had climbed to a 86.82, a 15-month low.

The weaker pound is good news for exporters because it makes their goods and services more competitive in countries outside the UK.

And with export cited by business organisations up and down the country as the panacea to drag the Northern Ireland economy out of recession, the slide for sterling has been welcomed.

"Northern Ireland does better out of a slightly weaker sterling than a stronger one," economist John Simpson said. "So long as sterling doesn't go down too much more, this will be quite a useful adjustment."

When it comes to manufacturing, nearly £13bn worth of goods were exported from Northern Ireland companies in 2011-2012, so even a small slide in sterling's value can have a big impact.

The currency slide was at odds with the main UK stock markets with the FTSE 100 climbing to a five-year high on the back of strength for the US exchanges.

And while a weaker pound may help exporters, not everyone will be pleased with the move.

Weaker sterling makes life more difficult for importers as the goods and services they buy in euros, dollars or other currencies cost more. It also makes it more expensive for Northern Ireland's holiday- makers.

And further falls looks likely.

Investment bank UBS forecast sterling is likely to be the next major currency that depreciates strongly.

Dealers also noted weekend comments from Bank of England rate-setter Martin Weale, who warned the pound was still too high to help the UK economy rebalance effectively. The continued pressure on the currency comes after its biggest weekly loss since June last year amid gloom over weak growth prospects.

The Bank of England has signalled it is willing to tolerate higher inflation for longer, while the pound's safe-haven appeal has also waned as the European Central Bank makes explicit commitments to prop up eurozone strugglers and preserve the single currency.

The yen also fell as the G20's finance ministers in Moscow shied away from criticism of Japan for weakening its currency. Prime minister Shinzo Abe has repeatedly called for a cheaper currency in order to help the country's exporters compete.

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