British exporters and tourists big winners in sterling plunge

UK exporters and overseas shoppers visiting Britain are shaping up to be the biggest winners from the plunge in sterling since the vote to leave the EU.

According to the Confederation of British Industry, manufacturers’ export order books hit a two-year high this month in a “tentative sign that sterling’s depreciation is starting to filter through to overseas demand”.

Chemical manufacturers accounted for just over half of the improvement in export orders, according to the CBI survey.

Total order books were largely unchanged and growth expectations, while still lower than before the EU referendum, have regained some of the ground lost in the immediate aftermath.

Anna Leach, the CBI’s head of economic analysis, stressed that sterling’s weakness was a “double-edged sword” and was also pushing up costs and prices. Earlier official data showed the prices paid by British companies for many commodities, including metals, had jumped markedly.

“The most significant effects of the vote to leave the EU will flow over the medium to long-term. Therefore firms need to see ambitious decisions in the Autumn Statement that will secure the UK’s economic future as changes to trade, regulation and access to skills loom on the horizon,” Ms Leach added.

Shopping

Retail operations also reported that overseas visitors have been taking advantage of the drop in the value of the pound.

Worldpay, a card payment processor, said that in the month after the vote the average transaction value on non-UK cards was up by 8.8 per cent compared with the preceding month.

Global Blue, a tax-free retailer, said there was a 7 per cent overall increase in shopping in July, driven largely by visitors from Asia and the US. Shopping centre operator Westfield said overseas footfall was up at its London flagship site.

Luxury retailers selling everything from wine to Swiss watches have all reported interest from rich foreigners seeking to snap up currency-created bargains.

Currency traders are not expecting any immediate rebound in the value of sterling, with speculators net-short on the pound by a record amount, according to official US data.

Driving most of the bets are the assumption the Bank of England will need to keep easing policy to support a weaker economy, while the US Federal Reserve considers higher rates.

Sterling hit a three-week high against the dollar on Tuesday, rising above $1.32, with speculators cutting bets against the currency as data suggested that Britain's economy is holding up surprisingly well in the aftermath of the Brexit vote. July inflation and retail sales numbers released last week beat forecasts, adding to signs that consumers had yet to rein in spending after June's vote to leave the European Union. Lower than expected jobless claims also gave the pound a lift.

Sterling rose as much as half a per cent to $1.3210, its highest since August 4th. It rose 0.3 percent against the euro to hit 85.85 pence, its strongest in 11 days, as speculators and hedge funds trimmed bets against the pound.

– Copyright The Financial Times Limited 2016