When Britain voted to leave the European Union, there was some question on whether it would help or hurt the nation’s economy. Some market analysts said the UK’s decision to leave would limit its trading opportunities, while others said it would open the doors to new trading opportunities. Well, it appears that we finally have some definitive proof regarding which side is correct.
According to numerous reports, British manufacturing exports have increased to their highest level in more than two years — a trend that’s believed to be powered by Brexit. As the pound weakened, it stimulated the country’s manufacturing industry, creating more export orders.
The UK’s index for measuring factory orders declined just slightly in August, dropping from 5 to 4. At the same time, however, export orders increased from 6 to 22, which is the highest they’ve been since August 2014, according to a survey conducted by the Confederation of the British Industry. This isn’t a trend that’s likely to go away anytime, soon. According to the survey, analysts predict the UK’s manufacturing output will rise from +6 to +11 in the upcoming three months.
Much like here in the US, when the UK’s currency weakens, its manufacturing industry strengthens. This is because weaker currencies allow consumers to buy more stuff. And when they can buy more stuff, it stimulates the manufacturing industry with more orders.
Of course, this wasn’t a surprise to everyone. Forbes predicted the UK would experience strong growth in the wake of leaving the European Union, saying “Britain’s vote to leave the European Union pushed the pound to a three-decade low last month, which may provide a lift to foreign sales and support economic growth. Net trade has been a drag recently, thanks to sluggish global demand and the strength of sterling.”
It’s not just the UK where manufacturing is experiencing strong growth. As we’ve discussed in previous blog posts, the US’ manufacturing industry is also growing, expanding with a positive ISM Manufacturing Index score month after after.
So, how long will this trend continue? According to the Confederation of the British Industry survey, the UK’s manufacturing industry will continue to grow for at least another three months, at which point who knows where the industry is headed. In any case, I’m sure residents in the UK are glad to see positive results from Brexit. The only question is for how long these positive results will continue.