LONDON (MNI) – Sterling’s 2007-09 depreciation seems to have helped
halve the UK trade deficit as a share of GDP, with goods exporters prime
beneficiaries, according to an article in the Bank of England’s
The article notes that sterling depreciated by around 25% during
this period and this more competitive level of sterling underpinned the
recovery and encouraged a switch towards UK-made goods and away from
travel service imports.
While the impact of the fall is in line with previous large drops
in sterling, different components of trade showed varying results.
The pound’s fall stimulated substantial switching of expenditure by
overseas companies and households towards UK goods exports.
Financial services exports seem to suffer as a result of the
financial crisis and there was little clear adjustment from exports of
other services in response to the depreciation.
Overseas spending by UK residents fell markedly as fewer households
have gone on holidays overseas, the study shows but imports of other
services do not seem to have responded much to the exchange rate
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