FOUR THINGS YOU SHOULD KNOW.
By Phil Andrew, Head of Customer Experience, Great Annual Savings Group
A lot has been made of the falling value of Sterling in recent days, which is obviously something that will alert businesses.
The pound has fallen 15% since the UK voted to leave the EU and is predicted to push inflation to 4% on 2017.
At Great Annual Savings Group we prefer not to comment on speculation. So what can we be certain of? What does your business need to know at this point?
1. The UK relies on imports
If you treat the UK as not being part of the EU, we receive more exports from the EU than any other non-EU country (marginally more than the US). The fall in the pound against the Euro means we can buy less from the EU for our money and the EU’s money will go further when buying from us.
The cost of importing and the money you can make from exporting will both react negatively until the value of the Pound increases. This value is constantly fluctuating but is on a negative trend.
A high-profile example of this is the recent spat between Unilever and Tesco, where the supermarket giant refused to pay Unilever’s newly inflated costs which were a result of the fall in Sterling against the Euro and the Dollar.
Find out more about how the UK trades with Europe here: https://fullfact.org/europe/uk-eu-trade/
2. We haven’t started negotiations for a ‘hard Brexit’ yet
It’s important to remember that there is still a lot to still be negotiated before the UK can leave the European Union. As announcements are made they should have an impact on the value of the Pound. Until these negotiations start, it’s advisable for businesses to enter deals for outgoings that are longer term. Not only will you get a more favourable rate, it allows cost certainty into the future and more sound financial planning.
At Great Annual Savings Group we advise our clients to enter longer-term deals to help them plan more effectively for future financial turbulence – especially with the expected rise in the cost of energy.
3. Evidence shows that businesses are being more cautious about investment in the UK
Car manufacturing giants Nissan put an end to the “will they/won’t they” talk by committing to further investment in their Sunderland plant last week, subject to the government meeting certain promises. But similar conversations are certain to take place across other large manufacturers and industries.
The Japanese Chamber of Commerce in Britain has since warned that other Japanese companies currently in the country have been made offers to relocate elsewhere in Europe if Brexit negotiations don’t go their way.
Financial strategy company Oliver Wyman has published a report estimating that 75,000 British financial industry jobs and £38 billion of trade are at risk if the UK leaves the EU’s single market. With many financial advisors and authoritative voices airing these sorts of figures, it’s no surprise that businesses are holding onto their money tighter than ever and refusing to commit to future investment.
If your business relies on investment from overseas, this is something that should be on your radar to address.
Read more about Japanese caution in UK investment:https://www.theguardian.com/politics/2016/oct/31/nissan-assurances-over-brexit-cannot-be-published-says-business-secretary
See more from Oliver Wyman’s report here: http://www.reuters.com/article/us-brexit-firms-idUSKCN1242EF
4. Winter is coming
Companies will soon turn on their heating for winter amid frightening reports of further price rises in the energy market. Fears of a supply shortage have been allayed over the last few weeks, but prices are certainly on the rise. With the pound not stretching as far as it did six months ago and the UK’s reliance on importing energy, you can be certain that the cost of running your business is going to increase.
Those on longer-term gas and electricity contracts can be sure of their expenditure. But if you’re a business approaching renewal, then there’s never been a better time to enlist the help of some market experts. Great Annual Savings Group can offer you a no-obligation chat around your options and let you know if we can save you some money or how to prepare for future market instability.
We’re proud to have saved our customers millions of pounds on their energy bills in 2016 and hope to help many more businesses record savings.
Get in touch to see how we can help your business in uncertain times by helping you focus on the things you can control, or for further updates please sign up to our newsletter below.