British export prices aided by sharp falls in oil and sterling

Britain's Beleaguered businesses have been handed a reprieve by the sharp falls in oil prices and the pound that have cut their costs and allowed them to raise their export prices, it emerged yesterday.

Britain's Beleaguered businesses have been handed a reprieve by the sharp falls in oil prices and the pound that have cut their costs and allowed them to raise their export prices, it emerged yesterday.

An 18 per cent slump in crude prices in April helped cut factories' raw materials costs by almost 3 per cent last month, according to the Office for National Statistics. But the prices charged by UK manufacturers fell just 0.1 per cent, indicating that companies banked the difference in higher profit margins.

Separate figures from the ONS showed that exporters' prices rose 1.5 per cent in March to their highest level since March 1997.

The recent fall in the pound against the euro meant even exporters who kept euro prices unchanged would receive more in sterling terms. This helped to boost exports to the eurozone by 3.5 per cent, which in turn narrowed Britain's deficit with the European Union to £893m in March from £1.1bn in February.

Analysts suggested the 7 per cent fall in the trade-weighted index of sterling could translate into a 3.5 per cent rise in export prices. "The extent to which this is sustainable over the coming months will depend more on global demand than currency movements," Geoffrey Dicks at Royal Bank of Scotland said. The flip-side is that sterling's fall should, in theory, raise the cost of imported raw materials. However, the producer price inflation data showed prices of most imported goods fell in April.

The figures will come as a relief to the Bank of England which had been concerned by the sharp rise in oil prices in the months preceding the Iraq war and the recent fall in the pound.