British consumers feel effect of Brexit
Prices raised after pound falls
BRITISH consumers are starting to bear the costs of Brexit, with companies raising prices of everything to counter a plunge in the pound caused by the UK’s vote to leave the EU.
French carmaker PSA Group lifted prices of its Peugeot, Citroen and DS vehicles by an average of 2 percent on August 1, a spokeswoman said this week. The increases made up for part of the pound’s 10 percent drop against the euro and its 13 percent fall versus the dollar. “We took a reasoned measure given the currency fluctuations.”
While some companies stood firm on prices, worried about losing market share in competitive UK businesses such as groceries, others were moving quickly to pass along the effects of the weaker pound. The increases underline forecasts for an uptick in inflation after the country flirted with deflation last year.
Alan Clarke, an economist at Scotiabank Europe, said it was “unusual” for companies to blame the Brexit referendum for cost increases they passed along so quickly. Typically there was a six- to ninemonth lag between big moves in exchange rates and shifts in consumer prices, he said.
Opportunistic
“I think you’ll have some opportunistic companies,” Clarke said. “Whether people actually buy those products or they get discounted at sale time, we’ll have to wait and see.”
Some industries, such as tourism, are more sensitive to exchange rates than others.
Since the referendum, PC maker ASUSTeK Computer said it planned to raise UK prices by 9 percent in October, while Dell said the weak pound “will have a direct impact on the price we sell some of our products to our UK enterprise customers”.
Smartphone provider OnePlus lifted the price of its flagship phone to £329 (R5 787) from £309. HTC marked up its Vive virtual reality headset by £70 to £759 from August 1.
‘The weak pound will have a direct impact on the price we sell some of our products.’
Headlam Group said it would raise prices, while USbased Mohawk Industries said it planned to adjust its European pricing “relative to where the pound has been”. Svenska Cellulosa said it was considering increases for diapers, liners and incontinence pads.
Conumers’ bills
The fall in the pound is one of several factors that could lift consumers’ bills. Depending on the outcome of the UK’s negotiations to leave the EU, the country might reimpose tariffs on imported goods. UK employers also face increases in the minimum wage.
Consumer prices climbed an annual 0.5 percent in June. The Bank of England forecast that inflation would accelerate this year and next.
Competition among supermarkets has kept food bills in check in recent years. Wm Morrison Supermarkets, which competes with chains such as Tesco and J Sainsbury, said last week that it was cutting prices of 1 045 items by an average of 18 percent.
But the average cost of a weekly trip to the supermarket rose 1 percent last month, according to price-comparison website mysupermarket.co.uk. Pasta was up 10 percent.
Companies that manufacture or source many of their goods in the UK are insulated from the pound’s decline.
UK vehicle sales fell in June and grew 0.1 percent last month as uncertainty over Brexit mounted. Parts provider Continental expected UK sales to fall in the second half of the year, but it raised prices in the UK on August 1 because of the decline in the pound, chief financial officer Wolfgang Schaefer said.
Several other European carmakers, including Peugeot’s rival Renault, said they had no plans to lift prices at this stage. – Bloomberg