As I pointed out in a blog earlier today, the pound has lost over 5% of its value compared with the Euro since the start of the year.
Exchange rate depreciations are often thought to be good for export-intensive industries like manufacturing. In an article on reshoring The Economist quotes Jack Welch from 1998 saying that:
“Ideally you'd have every plant you own on a barge to move with currencies and changes in the economy.”
And if the recent depreciation of sterling was a one-off maintained movement, we might just expect to see some of those barges sailing towards to UK…
But in truth, the current level of the exchange rate is not really so far off the average we've seen in the last couple of years. And although a one-off depreciation might support economic growth, as I pointed out in my earlier blog, exchange rate volatility causes problems for manufacturers. It can make pricing difficult and erode margins.
This is what has happened to the Sterling/Euro exchange rate in the last few years: