Thursday 18 August 2016 6:47 pm

One of Labour's largest donors wants to devalue sterling in a bid to stimulate growth in manufacturing

Labour's largest individual donor is calling on the party to consider deliberate currency devaluation to drive manufacturing growth outside of the South East.

John Mills, the millionaire founder of JML, has launched a new campaign group to push his proposals, which he also claims would help the party re-engage eurosceptic voters turned away by its pro-European messaging in the build up to the referendum.

Mills also chaired the Labour Leave group, and pamphlets distributed by his new campaign warn that 70 per cent of Labour-held constituencies had Leave majorities in the June vote.

They argue Labour must re-energise its ties with these groups, and pledge action to stimulate growth in manufacturing, in particular, which he said is hindered by the price of sterling, currently trading at around $1.30.

"To re-balance the UK economy we need to get the proportion of GDP coming from manufacturing up from 10 per cent to at least 15 per cent and to do this we need an exchange rate which is roughly £1.00 = $1.00 or perhaps $1.10.

"And we would have to make it clear that it was settled government policy to keep it at this level, so that investors and entrepreneurs had enough confidence in the future competitiveness of the UK’s cost base to make the necessary plant and machinery investments in our future," Labour Future says.

However, Labour Future denies that such a devaluation would spark crisis, arguing that while import prices would rise, it is not clear that overall inflation would happen any faster, or more dramatically, than without devaluation.

Speaking to City A.M. Mills said the policy is the kind of dramatic thinking needed to help Labour attain electability, adding he is "sceptical" of the ability of both of the contenders in Labour's leadership election to attract mainstream voters.

"The Labour party is that it has moved significantly to the left, but even with the challenge from Owen Smith, the stance that he has taken is not that for off what Jeremy Corbyn has been saying," John Mills said.

"At the end of the day, Labour needs to engage with policies that will carry Middle England with it, and produce an appealing growth for regions outside of London," he said.

Mills has previously suggested that a split for Labour would represent "Armageddon", and now estimates it could cost the party up to 130 of its 230 seats in parliament.