Companies yet to exploit pound's fall: Sterling's devaluation gives manufacturers an edge on prices, but the benefits are uncertain, as Mary Fagan reports

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The Independent Online
BRITAIN'S manufacturers are now able to sell about 13 per cent more cheaply on the Continent than they could three weeks ago. But few of them are yet taking advantage of the lower pound to boost exports, according to the Institute of Export.

Ian Campbell, the director-general of the institute, said that too many companies were failing to exploit sterling's devaluation. 'They fear cutting prices in overseas markets in case the position reverses, and even in case sterling further devalues, prompting more price changes.'

Since Britain left the European exchange rate mechanism on 16 September the pound has slid from DM2.79 to DM2.46, and from dollars 1.87 to dollars 1.72.

Mr Campbell said that while firms could not build long-term market share on the basis of short-term currency advantage, they could use it to make a start in new areas. 'It is a major advantage not just in Germany or the US but where we compete with companies from those countries.'

Companies, cautious about predicting the eventual benefits of the lower pound, said the picture was blurred by the cost of importing raw materials. Any advantage lasted only as long as it took to replace the basic feedstuff, evening out over a buying cycle that could be as short as a few months.

Williams Holdings, the conglomerate whose products range from curtain rails to construction fixings, claims to be already using the sterling devaluation against the mark to good effect.

Nigel Rudd, Williams's chairman, said that German rivals had been forced to raise prices in some sectors in Britain over the past few weeks while Williams has managed maintained its own rates.

Williams was also offering European customers lower prices, but only if guaranteed more space on their shelves. 'We would not go for universal price cuts but in some cases we can clinch a good deal. At the same time we are increasing our margins - there is no way we would give away the entire 13 per cent,' Mr Rudd said.

Part of the German economic miracle had involved companies building market share using low margins, he added. 'If we go out there now with the right products we can get them on the run.'

The Confederation of British Industry is also urging companies to take advantage of the devaluation to boost exports while cutting costs to control inflation. Howard Davies, the organisation's director-general, said that the pound's depreciation should create a competitive advantage, but there was little evidence so far of how companies were responding.

Little optimism was evident in the construction sector. Alick Goldsmith, director-general of the Export Group for the Construction Industries, said that the lower pound was a factor that would be of advantage in some cases. 'I would go no further than that. It certainly is a not a panacea for the industry's problems.'

In the chemicals business, some analysts say that large groups such as ICI could benefit to the tune of hundreds of millions of pounds, but again raw material imports confused the picture.

A clearer picture of how companies hoped to benefit from sterling's position should emerge later this month with the publication of the CBI's latest industrial trends survey. Until then, as umpteen company spokesmen relate: 'Everyone is in a meeting, and anyway, it is too early to say.'

(Photograph omitted)

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