THE UK HAS avoided the dreaded triple-dip recession with a positive GDP release earlier today. Markets had expected growth of 0.1% in Q1 and were pleasantly surprised when 0.3% was confirmed, a figure that will give the Pound support in the coming months.
Sterling has had a difficult year, falling by around 9% in the first two or three months of 2013. The weakness of the currency was based largely on expectations for further quantitative easing from the BoE – the money printing process designed to stimulate liquidity. Today’s data has decreased the likelihood of a new QE injection and sterling has been the major benefactor.
What does this mean for UK businesses?
This is positive news for the British importer, particularly those buying in US Dollars and Euros. The GBP/USD rate has been as low as 1.4850 this year and now sits above the 1.54 level. The outlook for the Pound over the next 12 months is much improved now and importers will find their costs fall.
Exporters however are seeing their goods become more expensive to overseas buyers, with scope for further moves against them. Many exporters are looking at long term hedging strategies to protect them from further pain. This is a wise move and one that more exporters should be considering.
Overall of course, this is good news for the UK economy. There are signs of light at the end of the tunnel and British business can take solace from a good start to the year. Lets hope there is much more good news to come.
Torrie Callander is a corporate dealer at Global Reach Partners
Global Reach Partners is running a complimentary workshop in the City of London on14 May that will looking at the main currency challenges facing UK companies