Eddie George and Gordon Brown offered cold comfort to Britain's exporters yesterday, both insisting there was nothing they could do to weaken the painfully strong pound.
The pound remained near its record high against the euro, which was stuck trading below 60p yesterday. The Monetary Policy Committee, meeting today and tomorrow, is widely expected to raise interest rates another notch, although probably not until next month.
The Governor of the Bank of England, speaking to members of the British Chambers of Commerce at their annual conference, said: "There are businesses that could do more to help themselves by improving productivity." But he added this was not true in all cases, as "the pressures that some are bearing go beyond what is manageable".
Mr George insisted, however, that the MPC - due to give its verdict on interest rates at noon tomorrow - could not lower rates substantially to boost demand. "I don't think that one can realistically argue we should consciously put the economy as a whole at risk of excess demand pressure and accelerating inflation in order to try to bring about a weakening of sterling," he said.
In a speech to the conference tomorrow, the Chancellor of the Exchequer is expected to send the same message. He will say the Government is seeking to boost productivity across the economy but businesses must also improve their own performance in the face of competitive pressures.
Giving evidence to the Treasury Select Committee yesterday, the Chancellor said he understood the pain inflicted on manufacturers by the high pound but denied the Government was to blame. "The most important thing is economic stability and I think we have had to make difficult decisions to achieve that."
He praised manufacturers who had responded to the high exchange rate by increasing their productivity by 5 per cent last year. The Chancellor added: "We are putting in place measures that help exporters to do well. In this new internet economy every company is capable of being an exporter because they can sell their goods on the Web. I believe exporters can respond and many sectors are responding."
However, the engineering sector, which yesterday reported the 13th consecutive quarterly drop in export orders in the first three months of this year, said productivity was rising at 5 per cent a year. But the Engineering Employers Federation said this was achieved almost entirely through savage cuts in employment.Reuse content