Exports might be up but risk of inflation remains, warns BDO

NORTH West exporters have been boosted by the fall in the vallue of the pound, but concerns over inflation rising loom large, research from BDO has found.

The firm, has published its latest European Business Trends report which reveals that the value of the pound has fallen by around 22% against the currencies of the UK’s main trading partners.

By contrast, the euro has gained around 7% in value.

This disparity has resulted in UK exporters having a significant competitive advantage over their European rivals with UK exporters far more optimistic.  

But the report details how this situation has also increased the threat from inflation. 

The BDO Inflation Index reveals that Britain experienced the largest ever increase in the annual rate of inflation in the fourth quarter of 2009. 

Gordon Lane, corporate finance partner at BDO in Manchester, said: “The Bank of England seems to have got it right so far.  However, there is a risk that low interest rates and quantitative easing could increase Britain’s vulnerability to inflationary pressures.

“Mervyn King is treading a fine line between higher inflation and economic recovery. 

“Despite recent encouraging news, the balance of risks is still on the downside and the Bank should continue its activist approach to monetary policy in the near term.”