Sterling strength strangles industry

Sterling strength strangles industry
UK electronics manufacturing industry influenced by pound. Alex Mayhew-Smith The unusually high strength of the pound is making life difficult for the UK’s electronics manufacturing industry, according to managers and industry bodies. The Sterling Index, which gauges the relative strength of the UK’s currency, reached 103.9 points – a six-month high – at the end of March. “It has probably had a significant influence on us,” said Jeffrey Davis, Viasystems’ European president. “From our point of view it is a long term problem, we are not so much influenced by peaks and troughs.” The six month high, however, is part of a larger trend, said Elaine Barnett, an economic advisor at the Foundation for Manufacturing and Industry. “The Index was at 80 in January 1996, a 20 per cent rise is quite a startling increase. [For electronics] I think there must be immense competition from Asia. The depreciation of their currencies could have an enormous detrimental impact on the electronics sector,” she said. What concerns the Federation of the Electronics Industry (FEI) is that when the pound is too strong, it curtails UK manufacturers’ ability to take advantage of inherent strengths. “It can severely curtail manufacturing. The electronics industry operates on a global basis – international organisations are ready to move manufacturing from one place to another when this happens,” said John Park, the FEI’s deputy director general. “We felt the Budget didn’t address the strength of sterling. About 52 per cent of UK engineering [including electronics] manufacturing is exported. If UK growth slowed down and European growth sped up it would help the situation,” said Barnett. “When there is a problem with a currency there is a trend to find continental based manufacturing,” said Davis. “The PCB industry is complicated by the fact that a customer will approve only one or two plants. Generally it makes the PCB industry less flexible and it tends to hit more.” Davis added: “Viasystems’ main production assets are in the UK, about 65 to 70 per cent of our production. Therefore most of our production is influenced by the pound.”


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