How UK business competes internationally

International trade is the exchange of goods and services between different countries. UK business can compete against foreign rivals by offering better designed, higher quality products at lower prices.

UK exports are products made in the UK and sold overseas, while UK imports are products made overseas and sold in the UK.

UK businesses compete internationally by importing and exporting goods and services

The exchange rate is the price of foreign currency one pound can buy. If the current exchange rate is two dollars to the pound, then one pound is worth two dollars.

The price of UK exports and imports is affected by changes in the exchange rate.

  • An increase in the value of sterling means one pound buys more dollars. The pound has appreciated (gone up) in value and become stronger.
  • A fall in the value of sterling means one pound buys fewer dollars. This means the pound has depreciated (fallen) in value and become weaker.

UK exporters benefit from a fall in the value of sterling. However British firms importing raw materials, components or foreign-made goods face higher costs and must either put up their prices or reduce their profit margin.