UK trade: One-way traffic
Exports should be booming but it takes more than a currency depreciation to reshape an economy
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When sterling fell 25 per cent against a basket of currencies during the financial crisis, economists thought they knew what to expect. Britain’s trade deficit would expand briefly as import prices rose, but then shrivel as the country sold more newly cheap exports and swapped newly expensive imports for things made at home. Neglected manufacturing regions would stir into life as the economy “rebalanced” away from debt-fuelled consumer spending. Countries in the eurozone, hamstrung by a single currency that had not fallen as much, would look on in envy.
When sterling fell 25 per cent against a basket of currencies during the financial crisis, economists thought they knew what to expect. Britain’s trade deficit would expand briefly as import prices rose, but then shrivel as the country sold more newly cheap exports and swapped newly expensive imports for things made at home. Neglected manufacturing regions would stir into life as the economy “rebalanced” away from debt-fuelled consumer spending. Countries in the eurozone, hamstrung by a single currency that had not fallen as much, would look on in envy.
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