Charlie Bean, one of the Bank’s deputy governors, says further appreciation in pound value would be unwelcome
Bank of England concern about the pound’s strength has been revealed in comments from one of Threadneedle Street’s top officials, who has said a further rise in sterling would damage hopes of an export boost to the economy.
Charlie Bean, one of the Bank’s two deputy governors, said the UK’s recent trade performance had been unimpressive despite help from a sharp fall in the value of the currency in the 18 months after the financial crisis broke in the summer of 2007.
The pickup in growth since spring 2013 has been accompanied by an increase of almost 10% in the pound’s value against a basket of world currencies, and Bean said any further appreciation would be unwelcome.
Speaking in Darlington, the Bank’s deputy governor for monetary policy said a rebalancing of growth towards exports was needed to ensure Britain’s recovery was “sustained and sustainable”.
He said: “The prerequisites for such a switch of demand towards net exports seemed to have been put in place by the substantial depreciation in sterling that occurred during the financial crisis. Sterling fell more than 25% between the middle of 2007 and the beginning of 2009.
“Despite the slowdown in our main export markets, that should have been sufficient to give a kick to net exports. The performance of exports – particularly exports of services – has, however, to date been somewhat disappointing.”
Bean said anecdotal evidence of businesses bringing back to the UK activities that they had previously “offshored” could mean it was simply a matter of time before the UK began to close a current account deficit worth 4% of national output in 2013.
“But any further appreciation of sterling, which has risen almost 10% in trade-weighted terms since March, would not be particularly helpful in terms of facilitating a rebalancing towards net exports.”
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