Brexiteers beware


UK currently has the best of both worlds but not for long

As everyone knows the UK is going to leave Europe and as a result it has experienced a monumental currency devaluation. This situation provided the UK with the best of both worlds but for a short time only.

Currently the UK is still in the EU giving it all the benefits of having access to the single market for financial services, insurance, travel, work and general trade. At the same time it is experiencing a rise in demand from overseas shoppers and for exporters due to devaluation of the currency.

The exports of manufactured goods are largely still happening on the basis of inputs that were imported whilst the pound was strong and being transacted on previously agreed overseas currency amounts giving for the short term the best of both worlds. This is about to come to and end as previously imported inputs will soon run out if they haven't already.

The other side of currency devaluation is about to rear its ugly head. Imported inputs are about to cost more. Therefore any exported good manufactured from inputs acquired overseas will face massive gross profit reductions. In addition for long term contracts where the sale amount was agreed in pounds manufacturers won't see the benefits of the currency devaluation, only the bad side.

Consumers are just seeing the inflationary effects of the devaluation with Unilever and Tesco's very public spat. Tesco tried to get Unilever to swallow the increased cost of manufactured goods. Unilever demanded a 10% across the board increase from Tesco on the cost of its goods. Consumers will soon see that the weekly shop is about to cost considerably more and holiday goers are already seeing that holidays abroad cost 10% to 15% more.

These are the financial implications that are happening already and we haven't actually left the EU yet.

Latest posts