Business Secretary Peter Mandelson pointed out recently that the advantages of a weak pound for the UK economy far outweigh it disadvantages. Mandelson went on to explain that because of the pounds “competitiveness” since the beginning of 2009 , U.K. manufacturers are winning valuable export orders and help to soften the blow of the recession domestically.

“Exchange rates move up and down. At competitive levels that we have seen last year, we have seen growth.” Mandelson explained

The pound is currently trading against the dollar at 1.6524, almost sixteen percent less than a year ago. When sterling was at its peak in November 2007 it was being traded as high as $2.116, and in January of this year it had reached a low of $1.3503.

However the pound remains relatively strong against the Euro, which according to Government sources makes it more difficult to do business in Europe, which has always been a valuable export market for the UK. Overall exports fell by 17 percent in the quarter up to end May 2009, compared to the previous year, according to information from the Office for National Statistics.

While this figure is less than inspiring, it could have been so much worse if not for the weak pound.

So for the meantime, a weak pound that will continue to increase the competitiveness of British exporters and boosts UK exports sales is to be encouraged. With the US economy beginning to recover, the possibility to increase UK exports will become increasingly stronger. The problem is that importing raw materials with a weak pound can be problematic. One area where a weak pound is a real cash bonanza is in incoming tourism. And this year with better weather to help it along, tourists are flocking to the UK and keeping their currencies flowing into our cash registers.

So if the production lines can be kept rolling, and sun keeps shining, the weak pound will begin to pay for itself.

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Tags: Banking, British Economy, British Pound, Financial News, Mandelson, Money, Money Management, Peter Mandelson, Pound, Savings

The pound plunged to a record low of 87.5 pence against the Euro following a think-tank report painting a gloomy picture of Britain in recession.

The National Institute of Economic and Social Research said the economy shrank by 1% in the three months to November – and contraction is speeding up.

The think-tank’s figures show the economy shrank by 0.8% in the quarter ending October 31.

The October industrial production figure – the eighth monthly fall in row marking the longest run of falling output since 1980 – dragged annual output down by 5.2%, the sharpest year-on-year decline since 1991 when the UK was last in recession.

The report followed desperate figures from manufacturing, housing and retail sales on Tuesday, that boosted expectations that a steep recession will put more pressure on the Bank of England to slash interest rates to record levels.

NIESR said that the outlook for 2009 was grim: “The Government faces the real risk that, despite the measures it took in last month’s Budget, output will fall more sharply than it expected to the end of next year. The main problem that it needs to address very urgently is the availability of bank credit; further interest reductions are unlikely to have much effect.”

“There is every reason to believe that the output decline in the fourth calendar quarter of the year will be larger than 1% in magnitude.”

Despite the pound’s losses against the euro, it edged up 0.2 percent to $1.4767 against the US dollar as word hit Wall Street of moves to inject cash to bail out US carmakers.

“These readings made a strong case for the United Kingdom ultimately suffering the worst recession in the developed world,” Commerzbank analysts said in a research note.

Despite the gloom, the FTSE closed up 81 points at 4381 after opening at 4300 but the DOW fell from 8934 to 8691.

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Tags: British Economy, Euro, National Institute of Economic, NIESR, Pound, Social Research