Exports can lead UK back to growth, says BoE’s Martin Weale
In a speech at the Warwick Economics Summit, he argued that the country’s worsening productivity may have been partly to blame but he claimed the main reason “may be that high levels of uncertainty, and a reluctance to take on new risks, have stood in the way of exporters seeking new markets and domestic producers doing what is needed to displace imports”.
Lack of confidence has been blamed for the relatively poor levels of business investment since the end of the recession, and Mr Weale said the explanation could be extended to manufacturers’ overseas ambitions.
“The costs which need to be incurred in entering new markets are a deterrent, not because businesses expect new sales not to be worthwhile but because … at a time of heightened uncertainty, the risks involved may be putting them off,” he said.
“Similar arguments probably apply to imports. Indeed, several businesses I have visited have told me they are reluctant to devote substantial resources to competing against imports because they are concerned the competitive advantage might not last.”
Business groups have claimed that the UK’s weak performance was because 44pc of exports are to the eurozone, where demand has collapsed. Exports to emerging markets have risen sharply from a low start in the past four years.
Mr Cameron hopes to help boost that further in India, which he is visiting with more than 100 UK executives.
Mr Weale said Britain’s export prospects would be best helped by a further currency depreciation, but warned it would result in higher inflation. Alternatively, Britain’s workers could become more productive, or accept further inflation-adjusted wage cuts.