Tag Archives: exchange rate

Greedy UK exporters are jeopardising our prosperity with exchange rate profiteering

Theresa May with Japan’s prime minister, Shinzo Abe, in August. Japan has promised to sign a trade deal with the UK as soon as possible after Brexit – probably because the stupidity of UK exporters means it will be easier to sell Japanese goods here [Image: Kazuhiro Nogi/Reuters].

This is a perfect illustration of everything that’s wrong with British business today.

The fall in sterling, after the EU referendum result in favour of Brexit, created an opportunity for UK exporters. It meant they could sell their products abroad more cheaply.

This would have made our exports more desirable, meaning (hopefully) that more foreign clients would buy them.

But exporters decided to push their prices up instead, making our products less desirable (although extorting more money from clients who were already contracted to buy from them).

Meanwhile, the depreciation in the value of the Pound meant imports became more expensive, squeezing UK citizens’ ability to buy and fuelling the recent rises in inflation.

The result: More poverty for the many, while a few business bosses made a short-term profit that they didn’t even share with the workers who actually created it for them by manufacturing the goods.

Britain’s manufacturing exporters have “hoarded” the gains from last year’s fall in sterling by putting up prices rather than increasing output and sales.

The Office for National Statistics said exporters could have allowed their prices to decline in line with the fall in the pound, making their products more attractive to foreign buyers, but chose to boost their profits instead.

Illustrating the uncertainty following the Brexit vote, which has made exporters nervous about expanding production, analysis by the ONS shows that UK companies increased export prices by 12.7% year on year in the months after the referendum in response to a 16.9% fall in the exchange rate.

Source: UK exporters have ‘hoarded’ gains from fall in sterling, says ONS | Business | The Guardian


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Is Theresa May DELIBERATELY trying to put the NHS into debt?

Read the following, from the Health Service Journal, and you might believe so.

Every time Theresa May makes a speech about Brexit, the Pound falls in value. It is currently at a 32-year low, as This Writer understands it – and that’s just in advance of her speech tomorrow (January 17).

A low Pound is great for FTSE100 companies that make their profits in dollars – and terrible for the NHS, which buys all its supplies with pounds.

Theresa May knows this.

So she must also know that she is cancelling out her claimed increase in NHS funding with every poisoned word she utters.

Brexit could result in an extra £900m bill for the NHS as suppliers hike their prices to protect themselves against a weakening pound.

The currency turmoil triggered by Britain’s decision to leave the EU could add a further 18 per cent to the efficiency target set out in the Carter review, according to NHS procurement expert Chris Robson.

Mr Robson, of the management consultancy Akeso and Company, estimates that at least half of the products used in the NHS originate from outside of the UK, with a high proportion manufactured in Europe, Switzerland, the US and the Far East.

Most NHS organisations buy products in the pound, which has plumbed depths not seen for over 20 years against most global currencies.

According to Mr Robson: “The ongoing and sustained deterioration in exchange rates versus key currencies… is very likely to lead to claims from suppliers for an increase in [pound] pricing over the longer term.

Source: Brexit: Fall in the pound could create extra £900m bill for NHS | News | Health Service Journal

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Do YOU feel as prosperous as you were before the crisis?

[Image: David Symonds for The Guardian, in February this year.]

[Image: David Symonds for The Guardian, in February this year.]

Britain has returned to prosperity, with the economy finally nudging beyond its pre-crisis peak, according to official figures.

Well, that’s a relief, isn’t it? Next time you’re in the supermarket looking for bargains or mark-downs because you can’t afford the kind of groceries you had in 2008, you can at least console yourself that we’re all doing better than we were back then.

The hundreds of thousands of poor souls who have to scrape by on handouts from food banks will, no doubt, be bolstered by the knowledge that Britain is back on its feet.

And the relatives of those who did not survive Iain Duncan Smith’s brutal purge of benefit claimants can be comforted by the thought that they did not die in vain.

Right?

NO! Of course not! Gross domestic product might be up 3.1 per cent on last year but it’s got nothing to do with most of the population! In real terms, you’re £1,600 per year worse-off!

The Conservatives who have been running the economy since 2010 have re-balanced it, just as they said they would – but they lied about the way it would be re-balanced and as a result the money is going to the people who least deserve it; the super-rich and the bankers who caused the crash in the first place.

You can be sure that the mainstream media won’t be telling you that, though.

Even some of the figures they are prepare to use are enough to cast doubt on the whole process. The UK economy is forecast to be the fastest-growing among the G7 developed nations according to the IMF (as reported by the BBC) – but our export growth since 2010 puts us below all but one of the other G7 nations, according to Ed Balls in The Guardian.

And it is exports that should be fuelling the economy, according to JML chairman John Mills in the Huffington Post. He reckons the government needs to invest in manufacturing and achieve competitive exchange rates in order to improve our export ability.

“Since most international trade is in goods and not in services, once the proportion of the economy devoted to producing internationally tradable goods drops below about 15 per cent, it becomes more and more difficult to combine a reasonable rate of growth and full employment with a sustainable balance of payments position,” he writes.

“In the UK, the proportion of GDP coming from manufacturing is now barely above 10 per cent. Hardly surprising then that we have not had a foreign trade surplus balance since 1982 – over thirty years ago – while our share of world trade which was 10.7 per cent in 1950 had fallen by 2012 to no more than 2.6 per cent.”

All of this seems to be good business sense. It also runs contrary to successive governments’ economic policies for the past 35 years, ever since the neoliberal government of Margaret Thatcher took over in 1979.

As this blog has explained, Thatcher and her buddies Nicholas Ridley and Keith Joseph were determined to undermine the confidence then enjoyed by the people who actually worked for a living, because it was harming the ability of the idle rich – shareholders, bosses… bankers – to increase their own undeserved profits; improvements in working-class living standards were holding back their greed.

In order to hammer the workers back into the Stone Age, they deliberately destroyed the UK’s manufacturing and exporting capability and blamed it on the unions.

That is why we have had a foreign trade deficit since 1982. That is why our share of world trade is less than one-third of what it was in 1950 (under a Labour government, notice). That is why unemployment has rocketed, even though the true level goes unrecognised as governments have rigged the figures to suit themselves.

(The current wheeze has the government failing to count as unemployed anyone on Universal Credit, anyone on Workfare/Mandatory Work Activity and anyone who whose benefit has been sanctioned – among many other groups – for example.)

You may wish to argue that the economy is fine – after all, that’s what everybody is saying, including the Office for National Statistics.

Not according to Mr Mills: “The current improvement in our economic performance, based on buttressing consumer confidence by boosting asset values fuelled by yet more borrowing, is all to unlikely to last.”

(He means the housing bubble created by George Osborne’s ‘Help to Buy’ scheme will burst soon, and then the economy will be right up the creek because the whole edifice is based on more borrowing at a time when Osborne has been claiming he is paying down the deficit.)

Ed Balls has got the right idea – at least, on the face of it. In his Guardian article he states: “We are not going to deliver a balanced, investment-led recovery that benefits all working people with the same old Tory economics,” and he’s right.

“Hoping tax cuts at the very top will trickle down, a race to the bottom on wages, Treasury opposition to a proper industrial strategy, and flirting with exit from the European Union cannot be the right prescription for Britain.” Right again – although our contract with Europe must be renegotiated and the Transatlantic Trade and Investment Partnership agreement would be a disaster for the UK if we signed it.

But none of that affects you, does it? It’s all too far away, controlled by people we’ve never met. That’s why Balls focuses on what a Labour government would do for ordinary people: “expanding free childcare, introducing a lower 10p starting rate of tax, raising the minimum wage and ending the exploitative use of zero-hours contracts. We need to create more good jobs and ensure young people have the skills they need to succeed.”

And how do the people respond to these workmanlike proposals?

“You intend to continue the Tories’ destructive ‘austerity’ policies.”

“The economy isn’t fixed but you broke it.”

There was one comment suggesting that all the main parties are the same now, which – it has been suggested – was what Lynton Crosby told David Cameron to spread if he wanted to win the next election.

Very few of the comments under the Guardian piece have anything to do with what Balls actually wrote; they harp on about New Labour’s record (erroneously), they conflate Labour’s vow not to increase borrowing with an imaginary plan to continue Tory austerity policies… in fact they do all they can to discredit him.

Not because his information is wrong but because they have heard rumours about him that have put them off.

It’s as if people don’t want their situation to improve.

Until we can address that problem – which is one of perception – we’ll keep going around in circles while the exploiters laugh.

Follow me on Twitter: @MidWalesMike

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