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Cheaper pound boosts exports, but effect may be short-lived

09 Jun 2016

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Responding to the latest international trade figures, which showed the UK’s trade deficit shrank very slightly in April, Michael Martins, Economist at the Institute of Directors, said:

“These figures show exports grew by the largest monthly amount since the first quarter of 2010, mainly driven by an almost 10% increase in the export of goods. This coincided with the pound depreciating, possibly in response to EU referendum campaigning stepping up a notch, with the official Leave and Remain groups designated in the middle of April. It seems that increased political activity created market jitters which saw markets sell off sterling, causing it to depreciate.

“The cheaper pound may have helped exports of high-value added goods like chemicals and machinery, although we should be wary of being too confident about cause and effect in one month’s figures. It is worth pointing out that these types of goods are the most likely to be subject to tariffs in the event of Britain leaving the EU, so any positive effect may be short-lived. The truth is that we just don’t know what tariffs UK goods will face in the event of Brexit.”

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