30 JULY 2026
External trade represents an underappreciated pathway to a stronger, more sustainable expansion for the UK economy.
The chart shows that sterling’s real effective exchange rate is currently trading around the lower end of its long-run range, suggesting UK goods and services are relatively price competitive on the global stage.
In principle, this should provide a tailwind to exports, supporting manufacturing, services, and inward investment.
Yet this advantage has not been fully realised in recent years, reflecting structural frictions and subdued global engagement post-Brexit.
A more outward-looking trade strategy could therefore play a meaningful role in lifting growth over time, particularly if supported by targeted policy measures such as reducing non-tariff barriers, strengthening trade partnerships and improving export support for UK firms.
Combined with domestic reform, a more competitive and outward-facing economy would give the new Prime Minister a credible chance of reversing years of stagnation and political uncertainty.
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