Some UK exports can be considered as dollar-linked by virtue of the countries they go to. Others can be considered as dollar-linked by virtue of the type of product or service they are: worldwide trade in many industrial sectors, even within the eurozone, is in dollars - oil, for example.

Taking into account both geographical and industrial linkages to the dollar, it is possible to estimate the proportion of all British exports¹ worldwide that are dollar-linked.

A reasonable guess is that the linkage of worldwide British exports to the other three major currencies apart from sterling is as follows:-

UK Exports' Linkage to Major Currencies
Dollar 60%
Euro 35%
Yen 5%
100%

On the face of it, this heavy UK weighting to the dollar is not too surprising. The UK is a global trader and investor with a huge financial services industry; and the

dollar is the currency in which 50 per cent of global commercial transactions² and 80 per cent of global financial transactions² are conducted.

Countries whose economies are effectively dollar-linked, even though they are politically independent and operate national currencies, include those which are reliant on natural resources (e.g. Saudi Arabia, Canada, Australia), and/or which have a high volume of trade with the USA (Canada again, Mexico), and/or whose currencies are officially or unofficially pegged to the US dollar (China, Pakistan, Saudi Arabia). Other countries, like Russia and a number of former Warsaw Pact members, have economies which, as far as foreign trade is concerned, are effectively dollarised.

As for international industries where trade is conducted in or by reference to dollars (even in the eurozone), apart from oil and its derivatives, there are, for example, civil aircraft and aero-engines, defence equipment, pharmaceutical intermediates and microchips. In addition, much of the earnings of the "City" – from British-resident banks lending overseas, or in the form of dividends and interest received from British firms' investments in North America and elsewhere, are in dollars.

Combining these two effects, geographical and sectoral, and applying them to the pattern and volume of British exports worldwide, is how the percentages above were arrived at. It must be emphasized that these are informed guesses rather than hard incontrovertible statistical evidence, but made conservatively by a team from Global Britain and outside economists and others, with long familiarity with British business. If anything, they may underestimate the extent to which British exports are dollar-linked, especially as the American-dominated "new economy" continues its explosive growth.

It is worth emphasizing also that if 60 per cent of British exports are dollar-linked this does not mean that 60 per cent of British exports are invoiced in dollars. That 60 per cent will be made up of invoices in dollars, sterling and in other currencies, though not, probably in euros and yen.

The extraordinary stability of the pound/dollar exchange rate (and the volatility of first the pound/DM and now the pound/euro exchange rates), adds credence to the estimate that 60 per cent of British exports are dollar-linked.

¹ UK exports worldwide of goods and services plus receipts of investment income.

² Source: European Commission.