A weak pound is no tonic for UK's long-term economic recovery

A tumbling pound is the defibrillator shock that Britain’s ailing exporters desperately needed to halt their terminal decline. That’s the message repeated on an almost daily loop by economists for Brexit.

Now that sterling has lost almost a fifth of its value against the dollar and about 14% against the euro since the referendum, it follows that the EU referendum vote was the best thing that could happen to the economy.

Almost overnight, manufacturers have found the price of their goods abroad have dropped, making them more competitive. They just need to let the currency work for them, revving up production safe in the knowledge they can undercut their rivals.

It is a narrow economic argument that uses Germany’s exporting prowess as a template. This success is all about exporting upmarket cars, trucks and machine tools to China, Brazil and the Middle East.

German goods are well designed and reliable, of course. They also come with the added bonus of being priced using an artificially low rate of exchange gifted by the euro.

It is safe to say the rest of the world would be far less interested in German products if they were still priced in Deutschmarks, no matter how reliable or well designed they were. They would simply be too expensive.

Read more: https://www.theguardian.com/business/economics-blog/2016/oct/30/a-weak-pound-is-no-tonic-for-uks-long-term-economic-recovery

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