The depreciation of the pound is a double edged sword: while exports have become more lucrative, imports have become more expensive as well.
As per the results of a survey, the depreciating value of the pound as well as the recovery of core markets in Europe have resulted in British factories receiving a higher number of orders and as a result they are growing at their fastest pace in more than three years.
In the survey conducted by EEF and consultancy BDO, a manufacturing lobby group, shows that British factories are currently enjoying a spurt in growth, which Brexit supporters had stated to be one of the benefits of leaving the EU.
However, numerous economist have made it clear that this revival is unlikely to offset the full impact of leaving the European Union as the sterling’s fall will push up inflation which will lead to slower consumer spending.
Manufacturing activity accounts for only 10% of the British economy.
“The post-referendum wobble that defined UK manufacturing’s performance in the second half of 2016 has been left firmly behind with manufacturers now rallying far more strongly than even they had predicted,” said Lee Hopley, EEF’s chief economist.
According to EEF’s survey, manufacturers have reported a sharp spike in their output levels with numerous firms reporting a rise by 31%, the highest since the third quarter of 2013.
Only a fifth of companies have reported lackluster sales from overseas market. Nevertheless, investment, business confidence and employment intentions are all seeing new highs.
According to the results of the survey, most firms see their prices rising further as they seek to ease pressures on their margins caused by the depreciating pound, which while making exports more cheaper makes imports more expensive.
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