By Molly Ambler
Manufacturing exports surge in wake of Brexit vote and pound’s slump, says CBI.
The pound has fallen by nearly a fifth against the dollar since the EU referendum. Heavy losses sent the value of sterling down by more than 2% on Tuesday to below $1.21 against the dollar while the Euro fell below €1.10.
Sterling recovered some lost value on Wednesday trading back over the $1.23 after MP’s announced a full and transparent debate on Brexit.
It may come as some surprise then that manufacturing exports have been booming since this shock political decision.
While the exports are booming some employers are concerned at the lack of skills available to them. Many firms have claimed that a lack of skilled labour available to them may limit their ability to meet export demands over the next few months.
The CBI’s chief economist, Rain Newton-Smith stated, “Manufacturers are optimistic about export prospects and export orders are growing, following the fall in sterling”.
However, Ms Newton-Smith concluded that “the weaker pound is also feeding through to costs, which are rising briskly and may well spill over into higher consumer prices in the months ahead”.
As manufacturing skills remains of a high priority many will be looking to the government to secure a migration scheme that meets the needs of businesses in the UK and “maintaining a preferential route between the UK and the EU, our largest trading partner, will be important” according to Ms. Newton-Smith.
However, this sharp decline in the value of sterling may not all be plain sailing for businesses and consumers alike. Unit costs, pushed up by rising import prices have raised at the fastest pace in three years and are expected to carry on increasing.
For consumers there has been some domestic price inflation, although small, which is likely to increase as businesses try to pass rising costs onto the consumer.
Not all have felt the decrease in sterling has had a positive impact on their business of the 231 manufacturers that submitted an answer to the CBI survey, 47 per cent have stated the fall in sterling has had a negative impact on their business, with 32 per cent citing a positive impact and 19 per cent citing a neutral impact.
It is clear that while the majority of the recent media reports have cited the positive impacts there are still large gaps in the industry, with the majority feeling concerned at the value of sterling.
The CBI has told companies to look towards the autumn statement from the Chancellor for further details on long-term industrial strategy. There is still uncertainty as to the future of UK manufacturing in relation to the EU.
For now we can cling onto the rise in exports as one positive impact of Brexit. Only time will tell how the industry will fair in the long term.