Strong sterling shatters hopes of UK recovery
BRITAIN’S manufacturers took a hammering in April as export orders plummeted because of the strong pound and the Eurozone crisis, data showed yesterday.
On a day when the FTSE gained one per cent and the Dow Jones index hit a four-year closing high, economists nevertheless warned that rising sterling could threaten any hope of an economic recovery.
Bank of England officials believed its policy of quantitative easing had helped push the pound down in recent years, which should make UK firms more competitive against foreign rivals, boosting exports and supporting growth.
But instead, fears over the state of the Eurozone economies have pushed the pound to its highest level in almost three years against a trade-weighted basket of currencies, dashing hopes that the economy could be rebalanced towards export-led growth.
“The UK recovery, such as it is, is very dependent on net trade,” said Citi’s Michael Saunders, arguing that the Bank of England might loosen monetary policy further to try to bring down the pound.
Markit’s purchasing managers’ index (PMI) showed manufacturing activity slowed sharply in April, from 51.9 in March to 50.5, barely above the “no change” level of 50.