Tweet
Exports can lead UK back to growth, says BoE's Martin Weale
Britain’s manufacturers must start taking risks and investing in new export markets if they are to lead the country back to sustainable economic growth, a top Bank of England policymaker has declared.
An increase in exports has been at the heart of Government plans to rebalance the economy away from the unsustainable consumer spending of the past Photo: Bloomberg News
By Philip Aldrick, Economics Editor
12:05AM GMT 16 Feb 2013
364 Comments
Martin Weale, a member of the Bank’s nine-strong rate-setting Monetary Policy Committee, claimed businesses have squandered four years in which the pound has been competitively weak because “heightened uncertainty” about the economic outlook may have been “putting them off” making vital investments in overseas markets.
The call to arms came ahead of David Cameron’s trade delegation to India next week, where he hopes to secure more orders for UK companies.
An increase in exports has been at the heart of Government plans to rebalance the economy away from the unsustainable consumer spending of the past and towards overseas demand. But Mr Weale said the evidence suggested the UK has “made no progress with rebalancing” to date.
The pound has fallen in value by more than 20pc since the end of 2008, giving the UK a significant advantage over rival exporters, but the country’s manufacturing industry “has done no more than hold its own”, he said. The US and Germany have both performed better than the UK without an equivalent currency gain.
There has not even been an increase in import substitution, whereby domestic goods replace foreign ones as their price in pounds grows more expensive. “It does not seem that import penetration has declined,” Mr Weale said.
Related Articles
In a speech at the Warwick Economics Summit, he argued that the country’s worsening productivity may have been partly to blame but he claimed the main reason “may be that high levels of uncertainty, and a reluctance to take on new risks, have stood in the way of exporters seeking new markets and domestic producers doing what is needed to displace imports”.
Lack of confidence has been blamed for the relatively poor levels of business investment since the end of the recession, and Mr Weale said the explanation could be extended to manufacturers’ overseas ambitions.
“The costs which need to be incurred in entering new markets are a deterrent, not because businesses expect new sales not to be worthwhile but because ... at a time of heightened uncertainty, the risks involved may be putting them off,” he said.
“Similar arguments probably apply to imports. Indeed, several businesses I have visited have told me they are reluctant to devote substantial resources to competing against imports because they are concerned the competitive advantage might not last.”
Business groups have claimed that the UK’s weak performance was because 44pc of exports are to the eurozone, where demand has collapsed. Exports to emerging markets have risen sharply from a low start in the past four years.
Mr Cameron hopes to help boost that further in India, which he is visiting with more than 100 UK executives.
Mr Weale said Britain’s export prospects would be best helped by a further currency depreciation, but warned it would result in higher inflation. Alternatively, Britain’s workers could become more productive, or accept further inflation-adjusted wage cuts.
Britain’s manufacturers must start taking risks and investing in new export markets if they are to lead the country back to sustainable economic growth, a top Bank of England policymaker has declared.
An increase in exports has been at the heart of Government plans to rebalance the economy away from the unsustainable consumer spending of the past Photo: Bloomberg News By Philip Aldrick, Economics Editor
12:05AM GMT 16 Feb 2013
364 Comments Martin Weale, a member of the Bank’s nine-strong rate-setting Monetary Policy Committee, claimed businesses have squandered four years in which the pound has been competitively weak because “heightened uncertainty” about the economic outlook may have been “putting them off” making vital investments in overseas markets.
The call to arms came ahead of David Cameron’s trade delegation to India next week, where he hopes to secure more orders for UK companies.
An increase in exports has been at the heart of Government plans to rebalance the economy away from the unsustainable consumer spending of the past and towards overseas demand. But Mr Weale said the evidence suggested the UK has “made no progress with rebalancing” to date.
The pound has fallen in value by more than 20pc since the end of 2008, giving the UK a significant advantage over rival exporters, but the country’s manufacturing industry “has done no more than hold its own”, he said. The US and Germany have both performed better than the UK without an equivalent currency gain.
There has not even been an increase in import substitution, whereby domestic goods replace foreign ones as their price in pounds grows more expensive. “It does not seem that import penetration has declined,” Mr Weale said.
Related Articles
- Snow triggers surprise fall in UK retail sales
15 Feb 2013 - Why aren't companies spending their billions?
17 Mar 2012
In a speech at the Warwick Economics Summit, he argued that the country’s worsening productivity may have been partly to blame but he claimed the main reason “may be that high levels of uncertainty, and a reluctance to take on new risks, have stood in the way of exporters seeking new markets and domestic producers doing what is needed to displace imports”.
Lack of confidence has been blamed for the relatively poor levels of business investment since the end of the recession, and Mr Weale said the explanation could be extended to manufacturers’ overseas ambitions.
“The costs which need to be incurred in entering new markets are a deterrent, not because businesses expect new sales not to be worthwhile but because ... at a time of heightened uncertainty, the risks involved may be putting them off,” he said.
“Similar arguments probably apply to imports. Indeed, several businesses I have visited have told me they are reluctant to devote substantial resources to competing against imports because they are concerned the competitive advantage might not last.”
Business groups have claimed that the UK’s weak performance was because 44pc of exports are to the eurozone, where demand has collapsed. Exports to emerging markets have risen sharply from a low start in the past four years.
Mr Cameron hopes to help boost that further in India, which he is visiting with more than 100 UK executives.
Mr Weale said Britain’s export prospects would be best helped by a further currency depreciation, but warned it would result in higher inflation. Alternatively, Britain’s workers could become more productive, or accept further inflation-adjusted wage cuts.
Comment