What next for the UK economy? Just before the EU referendum, the exchange rate between the dollar and sterling was $1.45 to £1.00. At the end of October it stands at $1.22 – a fall of 16pc. Who are the winners, who are the losers and how can we expect it all to pan out?
The clear winners are those involved in manufacturing and exporting from the UK. While the pound is low, they will benefit both from better profit margins and increased sales – as early figures show. Critically important among this sector of the economy are car manufacturers, who are facing both over-capacity and fierce competition for investment across Europe. Understandably, there is uncertainty surrounding the Brexit negotiations but a 16pc drop in all their sterling costs has to be a major reason for sticking to the UK as a great place for making cars.
Those whose businesses depend heavily on imports – including JML, the company of which I am chairman and the majority shareholder – are in a tougher position. Higher import prices mean either tighter margins or price increases. This could be mitigated by using inventory bought in at a higher exchange rate or by leaning on suppliers to absorb some of the strain, but end prices for imported goods and services will have to go up regardless of consumer resistance.