Strong sterling takes a toll on exports

The stronger pound is hurting efforts to drive an export-led recovery as manufacturers’ overseas orders grew at their most sluggish pace for almost a year in March.

The latest Chartered Institute of Purchasing & Supply/Markit snapshot of manufacturing activity last month showed the sector still in expansion mode, but growing more slowly than the City expected. The index — where a score over 50 signals growth — eased from 56.2 to 55.3 in March.

But growth in export orders is at its lowest since last May as manufacturers reported slackening demand from Asia-Pacific customers, Cips said.

The survey comes on the back of a strong increase in the pound, which has risen more than 10% from below $1.50 last July to above $1.66. Paul Hollingsworth of Capital Economics said: “A sharp fall in the export orders balance suggests the strong pound may finally be starting to hurt exporters.”

The survey — though indicating strong overall growth — also showed slackening demand for investment goods such as plant and machinery, although manufacturers grew staff for the 11th month in a row.

Rob Dobson, senior economist with survey compiler Markit, said: “The old criticisms still apply with the survey signalling a downturn in export growth and expansion that is all-too reliant on domestic consumers. However, the fact we have a healthy manufacturing economy generating jobs at a rate rarely seen in recent decades suggests the rebalancing process is under way.”