The strength of U.K. economic growth in coming years will partly depend on whether exporters respond to a weakened currency by investing to increase their capacity, or hold back in response to uncertainty about the future terms of the country’s trade with the European Union and the rest of the world, a senior Bank of England official said Thursday.
The pound shed almost a fifth of its value against the U.S. dollar in the wake of a June 2016 vote to leave the E.U. That depreciation has raised U.K. prices of imported goods and services, and BOE Deputy Gov. Ben Broadbent said there are already signs that is hitting consumer spending.
But the weaker currency has also boosted pound profits for exporters, and that may spur them to invest in new plant and equipment so as to sell more goods and services overseas. In a speech at Imperial College, Mr. Broadbent said exporters are in a “sweet spot,” but have reason to doubt that will last.