Weakened Pound Leads to Stronger UK Exports

By USDR

The Brexit vote has been good news for UK exporters, thanks to a 15% drop in the pound sterling relative to the Euro. The favourable exchange rate has been credited for the strengthening seen in UK manufacturing over the last few months. This is great news for manufacturers wanting to ship pallets to the EU in time for the holidayshopping season.

Manufacturing Growth

In November, the Huffington Post reported that the Markit/CIPS UK Manufacturing purchasing managers’ index (PMI) showed continued growth in September and October. Although October was a bit down from September’s 2-year high in manufacturing, at 54.3 it was still well above the usual output averageof 51.5.

This export trend is expected to endure in light of HSBC’s forecast that calls for the pound sterling to trade on par with the Euro by the end of 2016. While the weakened pound has already resulted in some price increases in the UK for petroleum and other imported products, the change in the exchange rate is expected to be beneficial to UKexporters, overall.

The growth in manufacturing exports is a significant change in trend from early 2016 when the UK trade deficit with the EU reached the highest levels since the first quarter of 2008. In fact, this trade deficit was one of the concerns cited by proponents of theBretix legislation.

Although there is still a great deal of market uncertainly related to the long-term impact of the Brexit vote, this change in the exchange rate couldn’t have come at a better time for exporters. In 2015, experts reported that European shoppers were expected to spend as much in the last two months of the year as they did in the rest of the year. All indications are that this trend will continue in 2016, making November and December prime sales months forEuropean retailers.

The last weekend in the November, running from Black Friday through Cyber Monday, has become the peak time for online shopping in the UK, US, and Switzerland. In Germany and some other EU countries, the busiest shopping days are typically in the first week in December, particularly the first weekend. This is in spite of a continuing trend for shoppers to start planning their Christmas shopping and other holiday purchases earlier in the year.

Black Friday and other holiday retail sales are expected to remain strong, however, more of these purchases are being conducted online. Increasingly retail stores are stepping away from single day sales and are now planning more weekend- and week-long sales to maximize their appeal to increasingly price-savvy shoppers. Sales are also starting earlier to compete for sales to early shoppers who now many begin their gift planning months ahead. Over the years this trend has moved the peak of Christmas shopping from a few weeks before the holiday to startingonBlack Friday.

Manufacturers are gearing up production and shipping to the EU and other markets now. Fortunately, entire pallets can be shipped from the UK and delivered to the EU in a little as two days. This makes it easier for UK manufacturers to still take advance of the exchange rates by delivering goods in time for thisyear’s sales.

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.
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