Hat Tip Stephanie Flanders, this is from the Bank of England. SF herself doffs her hat to Melissa of Lombard Street, who is another of those economists I read in order to appear more informed than I really am.
The Bank has a whole paper on why our terms of trade – what we sell stuff for, compared to what we buy stuff at – have not changed with the £ going downwards. The paper concludes:
In summary, the aggregate UK terms of trade have been relatively flat since the middle of 2007. This can largely be explained by the relative stability of the goods terms of trade, which make up around two thirds of trade. The stability of the goods terms of trade can be decomposed into, first, a small rise in the terms of trade for manufactured goods — perhaps because companies have been engaging in foreign currency pricing, or perhaps because UK exports are more specialised. And second, that had been offset by falls in the terms of trade for food and basic materials — perhaps because of the relative price elasticities of demand in the United
Kingdom and abroad, or as a result of a cost shock to UK food import prices.
Stephanie goes on to observe how by allowing exporter’s margins to expand, they might have enjoyed better cashflow, which given the *****Edness of the banks, may have made a critical difference to their continued existence.
But she poses this intruiging and rather pessimistic possibility:
Indeed, it could be that in this globalised world, the big gainers from depreciation are not UK exporters, or workers in UK factories, but UK shareholders in UK-listed companies who operate around the world and can now expect the sterling profitability of those operations to go up.