Green shoots or un-SPICED business?

Some suggestions that businesses are proving resistant to the recession have emerged this week. Firstly the BBC website, which is following the progress of ten small businesses, finds that they are continuing to prove their resilience. While computer shop Fusion Systems has taken on more staff as it expands the business, dental products manufacturer Dentanurse has had to work at full speed to meet orders and St Maur Hotel is enjoying more visitors than the same time last year. This matches a report in The Times today which looks ahead to the summer holidays and predicts a bumper year for the British tourism industry as people choose to holiday in the UK rather than travel abroad to the Mediterranean and beyond.

It also echoes a report in the Business section from the Chartered Institute of Purchasing and Supply showing that April recorded the smallest decline in manufacturing in the last 8 months – a more positive figure than was expected.

However, the weakness of sterling against other currencies is a likely reason for at least some of these stories. The boost to manufacturing is probably coming from some extra demand for British exports due to their relative cheapness due to the exchange rate. So this shows the opposite of the SPICED (Strong Pound = Imports Cheaper Exports Dearer) effect, with a weak pound causing lower imports due to their increased sterling cost but more exports. The tourism industry looks set to benefit not only from consumers reducing their holiday budget and looking for cheaper deals, but also from a reluctance to exchange weak sterling for expensive euros or dollars. Fortunately, the Met Office has said that we are ‘odds-on for a barbecue summer’, with temperatures above 30C, and this article has some great stuff about how supermarkets will use this forecast to plan their stocks of meat, fizzy drinks, white wine and leg wax!