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UK exporters take Pounding

Thursday, August 07, 2014 - 02:13

Sterling's up more than 10 percent over the last year - that's making UK companies feel down about their export prospects. From Barclays to ITV, they say they're hurting. Should Bank of England policymakers pay more attention to their plight as they hold their latest policy meeting? Joel Flynn reports on one exporter who says pound strength is their chronic weakness.

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Octink's a family company - just 100 people employed, many at their signage factory here in London. But although the British economy is looking up, times for this exporter are tough. SOUNDBITE: Octink Chief Executive, Will Tyler, saying (English): "We fought through to about 2012 and we found that the domestic consumption just wasn't picking up in any meaningful way and the government had been making lots of noises about support for exporting, so we deliberately went out and came up with an exporting plan." That strategy paid off - briefly. But as the UK economy has picked up, Octink and its boss, Will Tyler, are now getting hit where it hurts - in their profits. He says there's one thing above all others that's causing that. SOUNDBITE: Octink Chief Executive, Will Tyler, saying (English): "Oh it's very straightforward, if the pound continues to strengthen at the sort of rate that it's been doing and it's ongoing we will simply not get any orders any more because we will be completely uncompetitive against our international rivals. There's no doubt in my mind about that." SOUNDBITE: Reuters Reporter, Joel Flynn, saying (English): "Exporters like Octink are not the only ones under threat. Companies with sizeable operations abroad, like Barclays and ITV, have all warned about the damage a strong pound is doing to profits." The pound has risen 11 percent against the dollar in the last year. It's also up by around 10 percent against the euro. But with Bank of England interest rates at a record low of 0.5 per cent since March 2009 - and an economy that's gathering speed - the only way for rates is up. And that would strengthen the pound even further. The only thing appearing to stand in the way of a hike for now: slow growth in wages is still causing concern. Morgan Stanley's Head of European FX, Ian Stannard, says sterling strength isn't the Bank's priority. SOUNDBITE: Morgan Stanley Head of European FX, Ian Stannard, saying (English): "As long as we see growth still coming in relatively strong, I think at the moment it's not going to cause too much of a concern. Certainly if we look at the comments coming from MPC members in recent months, exchange rates haven't played too much of a role in their discussion." It's not just businesses warning about the effects of such a strong pound. The IMF has warned it's overvalued by as much as 10 percent. The irony for companies like Octink is that a more vibrant British economy could, for now, point to even tougher times ahead.

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UK exporters take Pounding

Thursday, August 07, 2014 - 02:13