Annual reweighting of the sterling exchange rate index

As announced on 14 February 2025, the Bank has now completed the regular annual update of the sterling exchange rate index weights. The new set of weights took effect from 12 March 2025 and incorporates revisions from 2018 onwards.

Overview

The sterling exchange rate index (ERI) is a measure of the overall change in the trade-weighted exchange value of sterling, calculated by weighting together bilateral exchange rates. It is designed to measure changes in the price competitiveness of traded goods and services, and so the weights reflect trade flows in manufactured goods and services. 

Using the USA as an example, the weights for the US dollar in the sterling ERI are based on:

  • competition in the UK domestic market from imports from the USA
  • competition between UK exports and US products in the USA
  • competition between UK and US exports in third-country markets.

The methodology for constructing sterling ERI is explained more fully in the article:

The new sterling ERI 

Narrow and broad sterling ERI

There are two measures of the sterling ERI available: narrow and broad. 

Countries are included in the narrow index if their share of either UK imports or exports on average over the latest three-year period is greater than 1%. ERI weights for each selected country are based on the latest available full set of world trade data, currently 2022. The January 2005 average index value is set equal to 100.

The broad version of the sterling ERI uses the same methodology but has an expanded country set. Countries are included in the broad index if their share of UK imports or exports on average over the latest three-year period is greater than 0.5%. 

Countries in the euro-area are included in both the narrow and the broad index regardless of their trade share.

To reflect changing trade patterns, the weights and country set are allowed to change over time to give an annually chain-linked index. These weights are updated each year with newly available world trade data, so that weights based on 2022 trade data are now used to calculate the chain-linked ERI from the beginning of 2023 onwards. Revisions to the weights stemming from revised trade data result in small changes to past values of the indices.

Latest sterling ERI weights

We publish new sterling ERI weights in March each year:

Sterling ERI weights (published 12 March 2025) 

This year’s key changes to the sterling ERI

Based on the latest available world trade data for 2023, Russia is no longer part of the broad measure due to a decrease in exports of goods and services. Meanwhile, Mexico is introduced to the broad measure in 2023 due to a continued increase in the level of imports of goods and services for consecutive trading years. Due to revisions in source data, Malaysia has been excluded from the broad measure from 2018. 

There have been no other changes to the constituent countries of either the narrow or the broad measure as a result of this year’s update.

The table below illustrates the most notable changes to the narrow index from this year's reweighting exercise and shows countries where a new or existing weight has changed by more than 0.2% in absolute terms. The index remains referenced to January 2005=100.

2021

2022

2023

2022-2023
Y-on-Y change1

2021
Revision1

2022
Revision1
Belgium and Luxembourg 5.0% 3.8% 3.7% -0.1% 0.0% -0.2%
China 11.9% 11.9% 10.4% -1.5% 0.1% 0.2%
France 5.6% 6.0% 6.2% 0.3% 0.1% 0.0%
India 2.5% 2.8% 3.1% 0.3% 0.0% 0.0%
Ireland 5.3% 4.9% 5.2% 0.3% -0.2% -0.1%
Japan 2.6% 2.6% 2.7% 0.2% 0.0% 0.0%
Malta 0.3% 0.2% 0.2% 0.0% 0.2% 0.0%
United States of America 20.4% 21.9% 21.8% -0.1% -0.3% 0.1%
Euro area total 42.7% 40.5% 41.2% 0.8% 0.0% -0.4%
RoW total 57.3% 59.5% 58.8% -0.8% 0.0% 0.4%

1Differences are due to rounding.

The most notable year-on-year fall between 2022 and 2023 relates to China, which was predominantly driven by decreased imports of goods.

The largest year-on-year increases were for Ireland, France, India, and Japan. Ireland’s market share relative to other countries increased for exports of services. For France, the movement was primarily driven by increased imports of goods. While for India, the movement was primarily driven by increased imports of services. Japan’s increased market share was due to both imports of goods and services.

There have been revisions to exports and imports services data from 1999. The most significant impact on the country weights is from 2018 onwards. As a result, pre-2018 revisions were omitted from this year’s re-weighting exercise.

For any further details or any questions on the sterling ERI, please contact DSDPLTeam@bankofengland.co.uk. 

 

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