The advantages of a weak pound

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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