Business Group Warns Against Sterling Debasement
As the Bank of England prepares for the tenure of new governor Mark Carney, one industry lobbyist has echoed business leaders by warning that another debasement for sterling will lead to dangerous inflation that will do more harm than good to the U.K. economy.
"We need a competitive currency, of course, but its already competitive," David Kern, chief economist at the British Chambers of Commerce (BCC) told CNBC Friday.
"The worse thing [Carney] could do, and I hope he won't do it, is have another big dose of QE (quantitative easing). To debase the currency again, to cause more inflation and he will cause much more damage to consumer spending than any benefit he will do to exports."
Since the financial crisis, the British pound has tumbled 18 percent against the dollar as the Bank of England has embarked on 375 billion pounds in bond buys. Inflation meanwhile, has been stubbornly above a 2 percent target and came in at 2.4 percent in April.
Kern's view matches that of a range of business experts interviewed by CNBC earlier this year, with some warning there was a "real danger" that the pound could plunge too far and weakening the economy.
"Our exports are not commodity exports. We are not going to benefit by another mega-devaluation of sterling," Kern said, adding that he was pleased that Mark Carney, who is seen as likely to further ease monetary policy, has only one vote on the Monetary Policy Committee.
"Simply bumping up demand will not do it. Demand will only go up because inflation is low. The danger is that by trying to boost exports by devaluation, he will do very little good to exports but he will do much more damage to domestic demand."
(Read More: Currency War Could Heat Up When Carney Joins BoE)
On Wednesday, Pimco became the latest investment firm to forecast further bond buying by the Bank of England after Carney takes over in July.
"I think a lot of what Carney will be doing is trying to stop the sterling getting any higher, and probably getting it lower — though I think he will certainly not be saying this up front," Mike Amey, Pimco's head of sterling portfolios, said at a press conference.
—By CNBC.com's Matt Clinch; Follow him on Twitter @mattclinch81