Brexit brought about a currency slide—among a slew of other things—and the depreciation has weighed on U.K. importers enough that now some are passing costs on to consumers.
When the U.K. made the decision at the end of June to leave the European Union, people panicked, markets fluctuated and the pound sterling fell to a more than 30-year low of $1.28 (a 12 percent dive). On Friday the currency was trading at $1.30 against the U.S. dollar, though analysts suspect the pound may be back down another couple cents by year end.
Export orders went up as a result, with a Confederation of British Industry (CBI) report showing 33 percent of businesses saw a rise in output volumes (by comparison, 26 percent said output volumes were below normal). Output growth is expected to continue its upward trend over the next three months.
“Our members tell us and our surveys show that the fall in sterling has boosted international competitiveness for many businesses, with export order books remaining well above average in September, despite weakening slightly,” CBI chief economist Rain Newton-Smith said.
But on the flip side of that coin, importers aren’t faring as well.
U.K. manufacturers paid 7.6% more for their inputs in August, up almost double July’s 4.1% increase compared to the same time last year, according to data from the country’s Office for National Statistics.
Because things like oil and other commodities are often priced in U.S. dollars or other foreign currencies, the price U.K. manufacturers pay in pounds for these goods will increase or decrease based on whether the pound appreciates or depreciates—so in this case, manufacturers are paying more for the same inputs because of the currency fluctuation.
Companies in all industries are bumping prices up to sustain their business.
Retailer Next has said its sales could slide next year because of price increases, according to The Wall Street Journal, and smaller firms are planning to raise their prices too.
Coffee wholesaler Enotria & Coe told the Journal the pound’s post-Brexit plunge pushed costs up by 8 percent and profits fell by half. The company said it has had to raise prices an average of 5 percent and consumers aren’t pleased.
“There are plenty of challenges ahead for manufacturers as we adjust to a new relationship with the EU and the rest of the world,” Newton-Smith said. “That’s why we want to see a focus on promoting investment and innovation in the Autumn Statement [annual statement on economic forecasts and the budget given by the Treasury] to ensure our makers are able to put their best foot forward to adjust to new opportunities.”