The EUR GBP exchange rate was lower for a fourth week as the pound sterling recovered from a recent failure at the yearly lows. A recovery rally in the euro faded and the pound has some support again to trade near 0.8500 on Friday. The UK saw a dip in GDP for the three months to July, but NIESR thinks August and September will improve.
The EUR to GBP rate is trading around 0.8535 as the week begins with UK employment figures released on Tuesday and inflation on Wednesday.
UK trade with EU falls as Brexit and virus hit exports
Britain’s trade with the European Union fell sharply in July, with Brexit and the pharmaceutical shortages driving exports down by £1.7bn more than in July 2018 and imports falling by £3bn, according to official data.
The Office for National Statistics (ONS) said the drop was driven by declines in medicinal and pharmaceutical products, which have also been affected by the need for separate regulatory approval after Brexit.
Experts predicted that the latest ONS figures could be a sign that the UK is losing its competitiveness, however, these are unexpected times. Compared with 2018, which the ONS described as the most recent “stable” period in UK trade, the change in trading levels is a worry but the economy would be expected to see an uncertain period.
In July, total exports of goods fell by £300m because of a £900m (6.5%) fall in exports to the EU, the ONS said. Exports to non-EU countries increased by £700m, but that was not enough to compensate for the overall drop.
NIESR expects UK growth to pick up after Delta hit
The economic thinktank NIESR has predicted that UK growth will have picked up in August and September, after seeing the bounce fade in July.
They have forecasted growth of 0.7% in August, largely due to the domestic tourism and hospitality industries. And growth is also seen picking up to 0.8% this month, with the return of many office workers, particularly in London, boosting the transport and hospitality sectors.
That would lead to a growth of 1.6% in the third quarter, which would be lower than the 4.8% bounce seen in April-June as the economy’s shackles were released.
Rory Macqueen, Economist at NIESR, said:
“GDP growth of under 0.1 percent in July would have been negative had it not been for the reopening of an oil field previously closed for temporary maintenance.
There was also relatively good news for the arts and recreation sector, thanks to the lifting of restrictions on 19th July, but clearly, the boost to GDP from reopening had slowed by the summer.
The Delta variant and supply issues – some but not all of which are linked to Covid-19 – have also provided headwinds to growth in the third quarter but there remains potential for ‘catch-up’ in transport, hospitality, and arts, which remained between 7 and 19 percent below their February 2020 levels.”
The UK saw a growth dip in Friday’s three-month average figures for July as staff shortages and supply chain issues slowed the recovery.