LONDON, March 23 British exporters, who have
been boosted by sterling's fall but are still able to trade as
before the Brexit vote, are in a "sweet spot" that is unlikely
to last indefinitely, a top Bank of England official said on
Deputy Governor Ben Broadbent said the fall in sterling -
down around 16 percent against the dollar since June's vote to
leave the European Union - ought to provide a powerful incentive
to invest among companies that trade internationally.
But businesses are "probably" already tempering their
decisions to invest because of uncertainty about Britain's
trading prospects after it leaves the European Union, Broadbent
He described the current situation for the economy - which
has held up to last year's Brexit vote better than the BoE
expected - as "post-referendum" but "pre-Brexit".
"The result is something of a sweet spot for exporters,"
Broadbent said in a speech at Imperial College in London.
However, sterling's weakness most likely reflected the
foreign exchange market's belief that when Brexit actually takes
place, leaving the EU will raise costs for companies that trade
internationally - whether through tariffs, non-tariff barriers
or lower productivity, he said.
"Barring some other source of exchange rate weakness, such
as a sharp rise in the household saving rate (which would have
its own implications for the economy), the sweet spot is
unlikely to last indefinitely," Broadbent said.
"Either the currency market is right about the consequences
of Brexit, in which case the UK's trading relationships will
become less favourable; or it's wrong, in which case sterling is
likely to recover."
Broadbent added that the impact of the squeeze on
households' real income since sterling's fall may be starting to
appear in the form of weak retail spending.
(Reporting by Andy Bruce, editing by Larry King)