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Economy 'cannot rely on exports' for recovery

An export-led recovery in the UK is not going to be as easy as many people have made out, it has been stated.

Dr Tom Kirchmaier, visiting fellow of the Financial Markets Group at the London School of Economics and Political Science, said that the UK is facing stiff competition from the US and other countries in terms of its exports, as well as the global recession making it less likely that other countries will want to purchase British goods.

He commented: "The next government might try to lower the exchange rate even lower to boost the export market, if possible."

According to the Ernst & Young Item Club spring 2010 quarterly forecast, consumer spending power is currently too weak to sustain a recovery, with household incomes badly squeezed.

Therefore, the outlook for the rest of 2010 remains poor. However, UK companies could improve the state of the economy by releasing some of the cash they have been holding on to during the economic downturn.