Weak Pound Helping British Exporters
While the fall in Sterling has caused pain to holidaymakers, it’s been a boon to exporters, since it means that UK exports become much more competitive on the international market. Of course, while it’s always good to make hay while the sun shines, it’s important to look long-term too as currencies can and do rise and fall according to market circumstances.
What the weak pound means
The weak pound basically means that British-produced goods and services effectively become more affordable. It does, however, also mean that it becomes more expensive to buy goods and services from overseas. This has several implications. One is that people in the UK have more of an incentive to “buy British” when possible. Another is that international customers may see a weak pound as a buying opportunity, at least for non-perishable items or may place orders now to be fulfilled at a future date. On the flip side, however, it may cause British companies to postpone, or at least scale back, investment, until such time as the Pound rises and it becomes cheaper to make purchases on the international markets.
Why is the pound weak (and when is it likely to rise again)?
Currency markets (and indeed markets in general) tend to dislike uncertainty. The Pound’s current rough ride and extended periods in the doldrums date back to the announcement of the Brexit referendum, although in the early stages, markets were only mildly perturbed by it since “Remain” seemed a foregone conclusion. When reality struck, the markets took fright and although it has lurched upwards from time to time, overall the Pound has been somewhat stuck in a rut ever since. The latest event to unsettle the markets was the triggering of Article 50, which marks the start of the official Brexit negotiating process. The question of when it is likely to rise again is more complicated. The Brexit process can take up to two years (in fact it could take longer if there is mutual agreement). We would therefore suspect that the Pound’s standing in the currency markets will be pretty much a direct reflection of the perceived progress (or lack thereof) in these talks. If it seems likely that there will be a hard Brexit, we would expect the Pound to stay (relatively) weak, whereas if the UK secures a deal to access the single market as part of a soft Brexit, it seems reasonable to assume that the Pound will rise again.
What does this all mean in practical terms?
Arguably the current weakness of the pound is less of an issue for companies in general than its relative lack of stability, since it makes it harder to plan ahead. At the same time, however, companies which are based on solid fundamentals can ride out currency fluctuations and operate effectively regardless of where the Pound ultimately settles. There are two keys to making this happen. The first is to have a “best-in-breed” (or even unique) product or service, preferably one which fulfils a clear need. The second is to have a compelling network of relationships. Although price is certainly one factor in purchase decisions, there are usually many others, most of which boil down to trust. In particular, buyers need to be able to trust that the product or service will meet their expectations and that it will be delivered/provided as expected. Fuzzy Brush and Fuzzy Rock meet both of these criteria. They are unique and innovative products, which meet a clear need and, additionally, have a broad user base. Because of this, they are highly in demand across a number of global markets, where the Fuzzy Brush company has worked hard to build and maintain positive relationships with key industry figures. This provides a secure flow of orders, regardless of the value of the Pound, as well as providing a solid basis for future expansion.
For more information regarding successful exporting in difficult times or to interview Jim Drew please contact
pr@fuzzybrush.com