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Thursday, 15 December 2011

Stronger Pound = Weaker Economy

For the first time in nearly a year, the pound has edged upwards against the €uro. Since last December it has stayed in a 1.15 - 1.17 band but has now edged up to 1.19. Hardly dramatic, but maybe it will go higher.

This is good news for €uroland exporters (ie, Germany) since it will make Mercs and Beemers marginally more affordable to British customers - and a weekend trip to Paris likewise .

It's bad news for Britain's service led-economy since it will make our tourist tat, language schools and financial services marginally more expensive.

Not so long ago, everyone was telling Greece that if it left the €uro and went back to the Drachma, it would automatically devalue, thus making Greek olives and holiday islands more attractive.

Since the introduction of the €uro, the pound has steadily devalued against it, thus helping keep us afloat with sales of Royal Wedding mugs and so on. The devaluation has been massive - ten years ago you could get 1.60 €uros for a pound.

Any appreciation of the £ now is a doubtful benefit. There are things on the plus side: our embassies in €uroland and Brussels will be cheaper to run. But is that enough?

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