By Marcus Leach

At the very time when the Government says that UK exporters are at the heart of its economic recovery plans, the deepening and seemingly irreversible economic crisis in the EU threatens to hit UK exporters harder than most.

“The turmoil we are witnessing is clearly not good news for anyone, but British businesses that export goods and services to the eurozone are now facing a potentially crippling double whammy," Jason Gaywood from currency specialists HiFX said.

"Not only will the crisis further depress an already weakened export market across Europe but in addition, firms that have Sterling costs need to factor in the effect of potentially adverse currency swings."

Traditionally a nation of importers, favourable currency movements and a difficult domestic market has led to a marked increase in the number of UK businesses which sell their products overseas - as many as one in five SMEs now export their produce.

Unsurprisingly, Europe is Britain's biggest trading partner yet worryingly, exports to the eurozone have already started to drop. The latest available data shows that the value of goods we sold in the EU was down by 3% in September while a recent CBI industrial trends survey showed that 42% of UK manufacturing firms report export order books to be below normal.

“If potential currency movements are taken into account, this trend could be set to continue. Over the last decade or so, GBP/EUR rates have moved about 33% in favour of the single currency giving UK businesses who sell into the EU an ever increasing cost advantage over those who are Euro based," Gaywood added.

Recently however, with Spain following in the ill fated footsteps of Greece and Italy being on the brink of needing an emergency bailout, the Pound has traded as high as 1.1750 against the Euro - the strongest it's been in over eight months. Moreover, analysts are suggesting that if this level was breached it could pave the way for a swift move to 1.2000 and beyond.

At that point, the rise from the July low of 1.1000 would represent a swing of more than 8% against those businesses that cost in GBP and sell in Euros.

“If the rot continues across Southern Europe and nervous currency traders continue to sell the single currency, an exchange rate of 1.3000 is not beyond the realms of possibility in the coming months," Gaywood said.

At that point, UK exporters will be faced with the stark reality that sales to their European customers will increase by as much as 15%.

With no end in sight to the bad news emanating from Europe and as yet, no credible solution to solve the increasingly desperate situation which threatens the very existence of the EU, those who sell there will face some tough decisions in the weeks ahead.

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