It comes as consumer price inflation held steady at 2.3pc in the 12 months to March, a level that is above the Bank of England’s 2pc target and is up sharply on the 0.8pc inflation in the previous 12-month period.
20 April 2017
British car manufacturers are benefitting from the weak pound to the tune of hundreds of millions of pounds per month, as new figures show foreign sales are generating higher revenues once translated into sterling.
Exports now account for a bigger share of turnover for UK car and trailer companies, reversing the traditional position in which the domestic market was the most important source of revenues.
Average monthly export revenues in the past six months stood at £3.4bn, according to the Office for National Statistics, up 16pc on the £2.9bn average a year earlier.
By contrast domestic turnover held steady at £3bn.
This is largely due to the fall in the pound since the Brexit vote last June, which has pushed up the prices exporters receive for their goods by 9.3pc compared with February of 2016. Domestic prices are up by a much more modest 3.2pc.
At the same time the effective exchange rate is down 10.7pc, with rising export prices moving almost in tandem with the currency.
The rise in domestic prices matches an uptick in wider inflation as the cost of imported goods – and some of the components used by manufacturers – increases, also because of the pound’s weakness.
“The recent increase in domestic prices may therefore be the result of manufacturers raising their domestic prices to compensate for rising input costs over the past year,” the ONS said.
However, he also said the current situation may represent an economic “sweet spot” as the currency has fallen in anticipation of more difficult post-Brexit trading conditions – but as the UK has not left the EU yet, businesses have not yet experienced any change in those conditions.
As a result, Mr Broadbent expects that if Brexit does not inflict the damage that currency markets fear, then the pound will rise again and the benefit to exporters will diminish. On the other hand, if leaving the EU does make international trade more expensive, then those costs will absorb the gains made from the weaker pound boosting exports.
Written By Sharon Shaw
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