29 Mar 2010

British pound weakens amid concens over debt levels

11:37 pm on 29 March 2010

Britain's burgeoning deficit, poor economic performance and threat of a ratings downgrade is causing currency investors shy away from the pound.

Exporters say profits are being eaten away as the pound has weakened against the New Zealand dollar to levels not seen for 25 years.

On Monday, the New Zealand dollar was buying just over 47 pence.

BNZ currency analyst Mike Jones says investors are shying away from the sterling because Britain's economy looks dangerously weak.

"The UK's deficit is just getting too large and that's been coupled with concerns about the upcoming election.

"If there is a hung parliament ... there are fears the resulting government won't be able to trim the deficit by enough to stave off a ratings downgrade."

Mr Jones say investors will stay away from the pound until the British government addresses the country's massive debt.

Winegrowers in New Zealand say the United Kingdom is no longer profitable and are looking to re-route produce to Australia.

Meat exporters say British prices are good, but currency rates are eating into profits.