Gordon Macrae

:: With 85 percent of its customers outside Britain, Sheffield-based Gripple should be cheering the plunge in sterling since last year’s vote to leave the European Union, which means every overseas sale brings in more pounds than before.

British exporters are enjoying a Brexit windfall as a result of the pound’s fall, which has helped push up the value of the goods they export by 15 percent since a year ago. Some hope the boost to manufacturers will foster a rebalancing of the economy, which has long relied on domestic consumers.

But Gordon Macrae, a senior manager at Gripple, which makes metal parts used to connect and tension steel cables, does not expect the boost to last long enough to justify speeding up investment plans, despite strong demand for its products.

“My honest view is that the government is slightly delusional if it senses there is a great opportunity for companies with the current value of sterling,” he said, speaking at a Gripple factory in the northern English city of Sheffield.

Leading Brexit advocates have said the cheaper pound will stimulate exports and investment, while pro-Brexit newspapers have seized on the improved trade figures to talk of an export boom for Britain ahead of June 8’s national election.

The Bank of England predicts export growth will outpace domestic consumption this year as rising inflation — also largely a product of the weaker currency — eats into households’ spending power.

But Macrae said Gripple, whose customers prefer to be billed in their local currency, was wary of using the changing exchange rate to compete on price.

“In terms of being able to build long-term customer relationships, the worst thing you can do is to be moving your prices up or down,” Macrae said.

Instead, customers that range from the builders of central London skyscrapers to farms in the Australian outback pay a premium for products that Gripple says are easier to install than its rivals’ and have stronger after-sales support.

Gripple’s ability to cut prices is also limited by the cost of raw materials. Zinc prices have doubled in dollar terms since the end of 2015, and sterling’s fall has intensified the effect.

“We have seen a double whammy,” Macrae said.

Camira, a weaving company based just over 20 miles away in Huddersfield, and whose fabrics upholster seats on underground trains in London and Paris, has had a similar experience.

“The way we are looking at this overall is that it is a bit of a one-off windfall,” said chief executive Grant Russell.

“There’s been one or two opportunistic sales. But our industry doesn’t typically work like that. It tends to be longer-term relationships, nurtured over many years.”

Camira, whose turnover rose by around 10 million pounds to more than 80 million pounds ($103 million) last year, plans to slightly speed up hiring for its small US distribution hub.

But it is worried that Brexit will push up costs, in particular if customs delays hurt its ability to import raw materials as needed, or delay shipments overseas.

“Our customers on the continent are increasingly asking us questions,” Russell said. “They are becoming a little bit more fearful. Will it cost them more for a meter of fabric? Will they face more bureaucracy?“

Export Volumes Flat

Gripple’s and Camira’s experience is shared by other exporters. Official data shows the value in sterling of British goods exports has risen 15 percent since last year — but the actual volume of goods sold overseas has barely changed.

The last time the gap between these two measures was so big was during the global financial crisis, when sterling also tumbled but export volumes failed to improve.

The weakness of the global economy was a plausible explanation then but key markets such as those in the EU are now showing growth.

It is possible that there is a time lag between the pound falling and exporters stepping up production and entering markets where they are newly competitive.

But history suggests this is unlikely to happen. British exports have tended to respond little to falls in sterling — not just in 2008, but also in 1992 when Britain abandoned the pound’s peg to the German mark.

Commerzbank economist Peter Dixon said many British exports, both of goods and services, tended to be in sectors where innovation and customer service, not price, were decisive.

In March, BoE Deputy Governor Ben Broadbent said the uncertainty created by Brexit might deter exporters from investing for the longer-term despite the current ‘sweet spot’ in profitability.

Camira is weighing up options outside Britain for when the country leaves the EU. It already weaves fabric in Lithuania and while moving more production there is not yet the plan, the company may need to invest in EU warehouses, Russell said.

“Our business model is based on getting fabric from the UK to a European customer within 48 hours. If that’s going to be 96 hours, maybe we need to look into creating European distribution hubs,” he said. “But that obviously adds costs.”