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In the News

Sterling's slide yet to help the UK economy rebalance

Geoff Riley

4th August 2017

According to this piece from Chris Giles in the FT, UK exporters have raised their prices and profit margins rather than driven increased volumes and market share in response to the post-Brexit vote sterling depreciation.

He argues that Portugal provides a useful contrasting example of how to re-balance an economy away from excessive reliance on consumption and running up large current account deficits as a result. Portugal is outperforming the UK in terms of trade & economic growth despite not having the stimulus effects of a more competitive exchange rate.

"You don’t need a currency depreciation to rebalance your economy and improve your trade performance in the modern world. Second, you don’t need to leave the EU or the single currency area to promote exports to the wider world."

Uncertainties about the eventual relationship between the UK and the EU are weighing on businesses and contributing to a slower projected trend rate of growth for the UK. That is one of the main messages from the latest Bank of England Inflation Report. Business investment remains below historic rates and productivity growth continues to disappoint. 

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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