Pound Shrink Impact

Published / Last Updated on 07/10/2017

Consumer Spending SlowdownPound Shrink Impact.

The pound had its worst week for a year amid concerns over the stability of the UK government and the Prime Minister’s leadership capabilities after the poor election showing and then poor speeches at the Conservative party conference prompting unofficial, behind the scenes and now public calls for a leadership contest.

Despite weak and gloomy economic predictions by both the International Monetary Fund (IMF) and Office for Budget Responsibility (OBR).  Construction slowing, car sales falling for the sixth month in succession.

What does a weak pound mean? 

It means larger UK companies that have overseas earnings make more profit when they convert those $ and € profits into £, meaning they are artificially making more money than they should be.  As a result, FTSE 100 rose by 2% this week.

Is it by design that this Government wants a weak pound? A weak pound means:

  • British exports are cheaper meaning more orders.
  • More foreign tourism as Britain is cheaper to holiday in.
  • British raw materials are cheaper to export.
  • FTSE 100 companies make more money = more corporation tax
  • Low interest rates = low mortgage rates = property prices stable and grow (The average UK house price hit £225,109 in September - its highest on record) = more stamp duty.