The pound de facto devaluation vs the euro
British citizens are feeling the pinch of the weak pound when travelling abroad, foreign goods have become more expensive at home and British firms find harder to attract good candidates from the Continent. But the British public has been told that all it is for the greater good. Thankfully the UK was not in the euro! Even Vince Cable, the (usually euro friendly) Liberal Democrat Business Secretary is now a euro-moderate. He told the BBC in November: “In the short term, we’ve had benefits from not being a member of the euro. It has been to our advantage to have a more competitive exchange rate.”
This has been one of the key arguments of the anti euros in Britain: hail the weak pound, free from the euro shackles, British exporters will gain new market shares with cheap products and it will boost the UK growth. This concept of an export-led growth has been sold again and again to the British public, even more with the advent of the euro crisis (despite the fact that there is no connection, the euro crisis actually making the pound stronger).
Unfortunately, a currency devaluation does not always lead to a surge in exports. On the contrary, the UK trade deficit has been slipping further down to record levels. The new October numbers, released Thursday, are not better.
No positive effect of the weak pounds on British exports as the trade deficit widens
However, the belief about the positive effect of being outside the euro is so entrenched in the average journalist mind that comments on the UK trade have been predicting an improvement of the UK Trade deficit repeatedly over the last year. It is striking to compare the headlines of the articles below with the UK trade deficit curve they are actually commenting. No wonder 80% of British people thinks the UK is better outside of the euro with such a quality reporting.
Weak pound may be the only way for Britain to recover, Evening Standard, 09.03.2010
Weak pound helps Britain narrow trade gap, Guardian, 13.04.2010
UK trade deficit narrows as weak pound finally starts having effect, Telegraph, 13.05.2010
Weak pound finally boosting exports, CBI says, Telegraph, 18.05.2010
Export orders soar thanks to weak pound, Independent, 18.05.2010
Weak pound gives British industry an export boost, Evening Standard, 01.06.2010
Weak pound starts to benefit Britain's exports at last, Evening Standard, 10.08.2010