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The effects of weak pound on UK companies



The effects of weak pound on UK companies

The article titled “Currency Declines Lose Export Punch” discusses the effects of weak pound on UK companies. Although the weaker pound was expected to make UK’s exports more competitive on the global stage resulting in increased growth, this was not the case at Chemoxy International Ltd.’s factory. A declining pound increased the value of the company by 20% in the export market. This advantage, however, was erased by the high cost of imported materials. More than 60% of the company’s products are sold in foreign markets. On the other hand, it imports nearly 85% of the raw materials used to make the chemicals, making it difficult to enjoy the advantages of a weaker pound. The same effect has been felt by many British businesses including Aston Martin, a car maker that imports more than half of the car components, denying them of the benefits of a weaker pound.

On the other hand, companies engaged in whiskey production have benefited from the pound’s fall. Since a high proportion of the ingredients involved are sourced within rather than being imported, these firms have realized increased exports that are now above 4 billion pounds. This growth is as a result of their dependence on domestic supply chains. Companies in the food manufacturing sector including the importation of fish have also faced the increased cost of doing business as a result of an increase in prices of these commodities. For instance, Albert Darnell Ltd. that processes fish has been incurring an addition 15, 000 pounds weekly as a result of the weak pound. However, they have passed on the increased cost to consumers. This has had a negative impact on sales since rising inflation has forced many people to trim their spending. The construction industry has also been negatively affected.The effects of weak pound on UK companies

It is evident that the ancient economists’ theory that a sudden fall in currency favors growth by making a country’s exports more competitive has not been extremely felt in the UK following the depreciation of the pound over the past few years. The weakening pound has failed to produce the expected results as a result of UK’s shrinking manufacturing capacity as well as present day’s interwoven supply network where manufacturers spend a lot of money importing costlier components from the overseas. The falling pound has, however, been a boon to those companies that source their components from within the UK.