The weak pound has started to make itself felt. First Marmite-gate and now other food suppliers seem to be following suit – but when will household budgets and SMEs throughout the supply chain start to feel the pinch?
The foreign currency market is volatile at the best of times, but a tumultuous 2016 sent it spinning in to over drive with Brexit responsible for the pound plummeting against the dollar.
It has been reported that the pound has fallen by about 18 per cent against the dollar and 12 per cent against the Euro since the result of the EU referendum. Effectively, imported goods and ingredients are now more expensive, while UK exporters can now offer more competitive pricing than before.
Back in October, Marmite temporarily disappeared from our shelves as a pricing war between Unilever and Tesco hit the headlines. Unilever imports some ingredients, which made its products overall more expensive, and wanted to raise prices to reflect this. Tesco responded by listing its products as unavailable until the two corporations found a resolution that suited both parties.
Prescient economy commentators claimed that this was merely the beginning, and that soon the cost of Brexit would begin to bite. Sure enough, in recent weeks, fuel prices have increased and Jamie Oliver has plans to close several UK restaurants – all blamed on the weak pound.
This week, Premier Foods became the latest company to announce it will be upping its prices to offset the weak pound. Household budgets are looking tighter as time goes on, and small business owners, whether they are somewhere along the food and ingredients supply chain, exporting or importing, are likewise at the mercy of shifting currencies and uncertainty.
The problem is that we hardly know any more about how Brexit will play out than we did back in June, and with so many unknowns it’s hard for small businesses to get a grasp of what the future will look like.
Looking ahead to 2017 there are yet more political events that are likely to shake things up – Donald Trump is soon to be sworn in as president of the US, Article 50 is expected to be triggered, and there are several European elections.
So what can a small business do to weather the storm? One option is to include plans for drastic currency changes in a contract, but renegotiations can be costly. Alternatively, buy your foreign currency in bulk so you have more time to react to market changes. Ultimately, it’s just about being cautious and keeping an eye on the market.
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