British exporters will find it hard to derive much short-term benefit from the weaker pound because of the global downturn, although the prospects further out look good, trade minister Mervyn Davies said on Monday.
With Britain expected to suffer its worst downturn since World War Two this year, policymakers have been counting on sterling's sharp slide against the world's major currencies to provide a boost to exports.
"We have an opportunity to export our way out of recession, but clearly most global markets have been suffering in the short term, so inevitably global demand has fallen," Davies told Reuters on the sidelines of the British Chambers of Commerce annual conference.
"Looking forward, Britain has got a huge opportunity in exporting. But clearly in the short term it is a challenge, because the whole world economy has slowed down."
Davies reiterated the government's line that the economy would start showing some growth towards the end of this year.
"We've fixed the banks, we're now fixing the economy and the Chancellor rightly points out that as we get towards the end of this year, into next year, we should see some signs of recovery," he said.
British finance minister Alistair Darling said last week he expects the economy to contract by 3.5 percent this year — its worst decline in more than 60 years — before showing a modest recovery in 2009.
Many experts reckon that forecast is far too optimistic. The International Monetary Fund reckons GDP will contract by 4.1 percent this year and will keep shrinking next year as well.
The Bank of England is also counting on exports to help Britain emerge from recession and has slashed borrowing costs to a record low of 0.5 percent and started pumping newly created cash into the economy to try to kick-start growth.
LITTLE ADVANTAGE
Some of Britain's European neighbours UK companies had gained an unfair advantage after the pound lost 30 percent of its value against the euro over the course of 2008, though sterling has made up some of that ground since then.
Davies said that countries like China and India still provided strong opportunities for exporters, as those economies were enjoying strong growth compared to most developed nations and he said the government was stepping up its efforts to promote British companies abroad.
He also said it was imperative that a global trade deal is reached to help shore up confidence and encourage trade flows around the world.
World leaders have made repeated calls this year for efforts to complete the Doha round of trade negotiations, but the talks remain stalled some seven years after they were launched with the goal of helping poor countries prosper through trade.
World Trade Organisation chief Pascal Lama said on Sunday that a renewed push to finish the talks would not begin until the United States is ready to engage, saying the Obama administration is positive on the issue but process has been slow.
"Securing Doha would have a huge impact on confidence around the world and a significant impact on trade," Davies said. "It would be an important step for the global economy."
