6. What impact has recent currency fluctuations had on Welsh exports? OAQ(5)0168(EI)

In general, a lower value for sterling would be expected to help support exports by reducing the prices of exported goods in overseas markets. However, export levels are affected by a wide range of factors. Irrespective of the currency position, the Welsh Government engages vigorously in a range of programmes to promote Welsh exports and these efforts will be redoubled as the UK leaves the European Union.

I thank the Cabinet Secretary for that answer. I’d be very interested to hear what specifically ‘redoubling’ actually means. I think it’s fair to say that when negotiations begin between the UK and the EU on our withdrawal from the European Union there might be market volatility, there might be further currency fluctuations as every angle of the negotiations is analysed, and the potential for leaks.

When I asked the Welsh Government what specific support was being provided for the agriculture sector in terms of mitigating currency fluctuations, the response was that currency fluctuations were beyond the control of the Welsh Government, which was a very helpful answer. The Irish Government has established a €150 million agriculture cash flow support loan scheme, making funds available to farmers at low cost to help address impact of currency and exchange rate volatility. I wonder if the Welsh Government might consider an equivalent scheme in this country to support exporters more broadly for potential volatility in the financial and currency markets.

I think the Irish example is one that certainly demands scrutiny and appraisal, but it’s my view that as we leave the EU we will need to work even more closely with the Department for Trade and Investment at a UK level, and intensify our activities in terms of trade missions and in terms of attracting foreign direct investment. We’ve enjoyed, actually, very recently, figures that have come out showing that exports have risen by a record amount. We’re seeing an increase in exports faster than the UK as a whole, up by more than £700 million, but there’s no doubt that as we leave the EU we will need to intensify our efforts to find more new markets and ensure that more businesses export.

The degree to which a country exports is a determining factor in how productive the economy is, and it’s my view—and I’ve been pressing this message with the business community—that more businesses in Wales need to examine the potential to export to more territories. For that reason, we’re looking at more trade mission opportunities and at more engagement programmes to ensure that businesses, large and small, are given every bit of support from Welsh Government they can get to enable them to export.

But one final point that’s very important as well as we leave the EU—currency stability, of course, will be a crucially important factor that determines the damage or the benefits in the aggregate that leaving the EU will deliver to Wales and the UK. But we must go on working where we can with other parts of the UK, both internally and as the UK on an international stage, not least because huge opportunities are delivered to us by Governments outside of Wales, but within the UK, in terms of trade investments leads and also intelligence on new and emerging export territory. So, it’s important that this Government goes on working with other Governments across the UK.

Devaluation means that exports are cheaper in the purchasing currency, but the cost of imports increases in pounds. The pound has fallen from $1.5 from last June to between $1.2 and $1.3, a 14 to 20 per cent reduction. And whilst the cost of imports increases, supported exports are going to increase the cost of exports to be reliant on bringing in raw materials from abroad and producing goods to be exported. It also brings inflation into our economy, which has gone up by a factor of 9 since last year.

Does the Minister share my concern that Welsh exporters can get affected by the increased cost of the raw materials coming in, at the same time as they’ve already set fixed prices for their goods going out, and they’re getting squeezed by that, and does the Cabinet Secretary also agree that what we need is some form of currency stability, so that people know exactly where they are? We’ve had the devaluation—we now need to stay there. We can’t keep on having our currency bouncing around—everybody suffers.

We’ve not had a strong and stable exchange rate in recent months—it’s something that the business community and our economy most certainly need. Depreciation of sterling since the referendum result has been a double-edged sword, in terms of what it has delivered for some exporters in Wales. As Mike Hedges suggests, one effect is to push up the cost of imports, and this adversely affects exporters both directly, as it increases the cost of imported inputs, but also indirectly, as it increases prices across the whole economy, and therefore affects even domestically sourced inputs.

Now, I’m keen to make sure that we examine supply chain opportunities for, in particular, key manufacturing sub-sectors, where there are opportunities across Wales to grow small companies, and indeed to start up new companies. I can think of a number of opportunities in the automotive sector, where currently, considerable numbers of parts for cars produced in the UK are actually sourced from outside the UK, whereas as we leave the EU, it may well be possible to grow businesses within Wales that can act as supply chain manufacturers of goods for the automotive sector. For that reason, a summit is being convened that will bring together the likes of Bentley, Toyota, Vauxhall, Ford and Jaguar Land Rover to ensure that we examine fully and scrutinise the opportunities for a stronger supply chain in the automotive sector.