
Sector analysis: A bit of back story
The 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.Sector analysis: A closer look at the numbers
Taking 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).Sector analysis: The here and now
The 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.Share this story