THERE is considerable scepticism over the speed with which the UK will emerge from the past year’s recession.

Although the consensus expects 2010 to mark a return to growth, the forecast rate of +1.1% is feeble, and makes few inroads into the economy’s decline of 4.3% in 2009.

It is common for analysts to underestimate recoveries as well as recessions but there appear legitimate grounds for concern that the recovery will be slow to start, based upon the headwinds affecting the consumer and government sectors.

With the economy’s key structural problems being excessive consumer debt and an unsustainable fiscal deficit, the twin drivers of UK growth over recent decades are set to remain low on fuel, turning the spotlight onto industries and services that can be exported or replace imports.

Improving the country’s trade performance is generally associated with an export boost from manufacturing but the role of goods that substitute for imported goods should not be overlooked, nor should sectors such as tourism (or financial services). All are likely to be needed if an acceptable rate of growth is to be enjoyed, in the face of ongoing retrenchment from consumers and government spending.

Although the manufacturing sector is now a small part of the economy (well under a fifth) the cyclical nature of its products (think car components and pumps) means that it can be highly volatile, thus contributing a substantial amount to the variability of the economy’s overall growth rate.

This has been a negative factor over the past year, as industrial output plunged worldwide, but the boost from a more competitive level of sterling, as well as a global recovery, should result in a significant boost to the fortunes of this sector in the coming year. This will help to buoy the economy, in the face of what seems likely to be an extended period of budget austerity, personal debt reduction and credit rationing.

However, it is not enough for the profitability of the current manufacturing base to experience a one-off boost. In order for companies to be persuaded to replace their facilities or expand, they will need to be confident that the competitiveness of the UK economy will be sustained.

During the past 30 years, periods of sterling weakness have often reversed when the economy recovered, creating occasional windfall periods for manufacturing but no reason to plant new trees.

Given the requirement to correct economic imbalances that grew up over decades of over-consumption and increasing free-spending in the public finances, the Government will need to articulate a medium-term strategy for nurturing competitiveness to enable the UK to pay its way in the world.

Since it seems unlikely the UK will join the euro to lock in the current low level of sterling (both the British electorate and European governments would object) there will need to be a long-term focus on creating the conditions for export growth (in services as well as goods).

While we wait for our political leaders to wake up to this, the Bank of England has been quietly drawing markets’ attention to the reasons for sterling’s fall, the implication being that it should not be reversed.