Sterling’s fall may be good news
The fall in the value of sterling could provide a timely boost for Britain’s manufacturing sector
Sterling falls against the Euro
The fall in the value of sterling against the Euro is an important macroeconomic development. No one factor explains the scale of the depreciation but part of the fall is due to expectations of lower interest rates by the Bank of England and also a slowdown in the inflow of international money that, in recent years, has come in to help finance the UK housing boom.
Over 55% of Britain’s trade is with fellow members of the European union so a change in the exchange rate against the Euro potentially has significant effects on the volume of goods and services traded between the UK and our European partners.
David Smith writes about this in his latest Sunday Times article - also available in his blog.
One aspect I hadn’t thought about when discussing the exchange rate in class today was the possible impact on the incentives for migrant workers to come to Britain to work. But the bigger picture I feel is that this could give a shot in the arm for what is left of UK manufacturing industry - exporting to the EU will become more profitable, I hope our export sectors can respond quickly.
