driving sales with overseas suppliers as goods and services will have been cheaper and more competitive to export. At the same time, other businesses will have lost out as overseas suppliers have become more expensive. It largely depends where each business sits in the supply chain, but unfortunately many businesses have become increasingly familiar with rising costs, increased prices and inflationary pressure. Some industries have taken a harder hit than others, so here we explore who’s facing the greatest cost pressure with the weaker pound.
Sector analysis: A bit of back storyThe trade-weighted value of the pound dropped to a 168-year low following the EU referendum last June. This was bad news for businesses paying bills in foreign currencies, and more cash had to be found to cover outgoings. The types of businesses affected include anything from international wholesalers buying up supplies, manufacturers importing machinery and even tourist operators paying for continental advertising. To analyse which industries would be feeling the pinch, World First has trawled through over twenty years of inflation data from the Office of National Statistics (ONS), profiled the data to match the costs facing UK industries and correlated those costs with the value of the pound. The analysis found that the average UK business sees costs rise whenever the pound falls those making the most of being more competitive abroad to drive sales are certainly not among the majority.
Sector analysis: A closer look at the numbersTaking an industry-by-industry view, it becomes clear that utilities and mining firms are the hardest hit, with financial services and the creative industry fairly well insulated from the weaker exchange rate. These results are also reflected in ONS inflation data, which shows that since 1996 the mining sector has seen factory-gate prices rise by nearly 50 per cent whereas financial services costs have stayed broadly flat in the same time. Since the referendum the industries affected, ranked from most to least, were: utilities (15.51 per cent potential increase in costs); mining (15.15 per cent); construction (14.15 per cent); agriculture (13.55 per cent); real estate (12.51 per cent); manufacturing (11.81 per cent); tourism (11.23 per cent); wholesale and retail trade (10.34 per cent); hotels and restaurants (9.93 per cent); transport (8.58 per cent); public administration (6.88 per cent); education (5.37 per cent); creative industries (5.15 per cent); financial services (4.61 per cent). The average business in the UK is likely to have seen around 10.76 per cent rise in costs since the EU referendum.
Sector analysis: The here and nowThe pound has recovered somewhat since the dramatic fall last June, but it’s still not plain sailing for UK-based businesses. World First’s economist Ed Hardy said: ?With the timing of the June snap general election, business costs should be closest to the top of the list of concerns for those running the government. ?Unfortunately, with such a focus on political point-scoring over the European Union debate, immigration and party leadership, we don’t foresee business costs being much of a priority for candidates which could prove costly in the long run. The pound is still weaker by about ten per cent compared with pre-referendum levels, which could translate into a rise in costs of over 15 per cent for some industries. The UK will have to take a very measured approach towards negotiations with the other 27 member states of the EU to prevent some industries falling even further behind.
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