ECB's Interest Rate Hike Lifts UK Exporters' Confidence, Finds Survey
British exporters’ confidence in the UK economy and trade opportunities has led to a three-point increase in the Travelex Confidence Index. The index, which measures the sentiment of UK businesses trading internationally, has regained the high seen earlier this year and currently stands at 106 – five points higher than at the same time last year.
Since March, exporters’ confidence in the UK’s economy has increased by 25% to 55%. The European Central Bank’s (ECB) April interest rate rise and the consequent strengthening of the euro have combined to provide exporters with a competitive edge in the international marketplace and a renewed confidence in current and future trading opportunities.
Exporter confidence is also being propped up by the UK government’s stated objective to target an export-led economic recovery, with 58% of exporters believing its policies are effective compared to 32% in March, before the Budget announcement – a rise of 81%.
Despite recent disappointing economic data, the outlook for both importers and exporters is rosier than expected, warmed by the sunshine, bank holidays and royal celebrations. More than four in five (81%) exporters are confident that international trade conditions will improve over the next 12 months, up from 62% in March.
David Sear, global managing director at Travelex Global Business Payments, said: “April revealed a blossoming of confidence among UK exporters in trade conditions and the economy. Interest rates play a strong role in determining the strength of currencies and we can clearly see this playing out in April. Not only has European Central Banks’ hawkish approach hugely supported the euro, it has also energised UK exporters, who are brimming with confidence with the resulting weakening of the pound.
“Although export trade is emerging as a strong contender to boost UK economic growth, it is vulnerable to any change in the outlook for the eurozone interest rates. The ECB’s less hawkish than expected stance on policy has already seen sterling recover from its lowest in more than a year as investors temper their outlook. If that theme gains traction in the coming weeks, it suggests a softer euro/sterling which might bode better for UK importer sentiment,” he added.