The latest from the Black Country 

Fall in Sterling Expected to Increase Cost Base and Push Up Prices

Corin CraneThe recent fall in the value of Sterling is squeezing domestic sales margins, and increasing the cost base of UK businesses, according to the results of the British Chambers of Commerce’s (BCC) latest International Trade Survey. The findings, released today, also indicate that the weak pound is expected to push up the prices of products and services.

The results of the survey, which are based on the responses of nearly 1,500 surveyed businesses from across the country, indicate that the recent devaluation of Sterling is having a negative impact on the domestic sales margins of nearly half of businesses (44%). The effect is more diverse on export margins, with roughly equal levels of businesses reporting a positive (25%) and negative (22%) impact, suggesting that while the fall in value of the pound may be helping some UK exporters, it’s also hurting others, particularly those who import.

The survey also found that 68% of businesses expect the fall in the value of Sterling to increase their cost base in the coming year. In turn, over half (54%) of companies expect to have to increase the prices of their products and services over the next 12 months.

Away from prices, the findings also show that nearly half of businesses (45%) do not currently manage currency risk. For those that do, invoicing in Sterling instead of their customer’s local foreign currency (32%) was the most popular means, followed by opening a foreign currency bank account to deal with sales and purchases in the same currency (16%), and waiting for an advantageous rate and buying using the spot market (14%). The same number of businesses (46%) don’t expect to manage their currency risk in the next six months.

Dr Adam Marshall, Director General of the British Chambers of Commerce (BCC), said: “The depreciation of Sterling in recent months has been the main tangible impact that firms have had to grapple with since the EU referendum vote.

“Our research shows that the falling pound has been a double-edged sword for many UK businesses. Nearly as many exporters say the low pound is damaging them as benefiting them. For firms that import, it’s now more expensive, and companies may find themselves locked into contracts with suppliers and unable to be responsive to currency fluctuations.

“Our survey shows that inflation is going to be an important concern for businesses over the coming year. While inflation rates aren’t high by historical standards, they are still putting increasing pressure on companies. Rising costs are squeezing margins, and forcing many firms to increase the prices of their goods and services.

“Currency fluctuations aren’t something in the UK government’s direct control, and they are likely to continue as the Brexit transition unfolds. Ministers must do everything in their power, meantime, to help businesses keep costs down and stay competitive. Alleviating many of the up-front costs facing companies should be a priority for the Budget in March – starting with the sledgehammer of business rates.”

Corin Crane, Chief Executive of the Black Country Chamber of Commerce, further commented: “Within the Black Country, the depreciation of Sterling has consistently been flagged up as a cause for concern amongst the local business community since the national vote to leave the European Union. This assertion is substantiated by the fact that 52% of businesses who took part in our latest Quarterly Economic Survey expressed that exchange rates were an issue for their company heading into 2017.

“As a Chamber, we offer a holistic range of products and services to help businesses trade on a global scale, from international trade support delivered by the Department for International Trade, through to export documentation services. In addition, for those businesses who are not currently managing their currency risk, our Affinity Partner, RationalFX, are able to offer our Chamber members a discounted rate on foreign currency transfers.”

Black Country Chamber of Commerce is the voice of Black Country businesses and Trade Policy is an important part of that work. For more information on the work that the Chamber is currently doing, please visit or call 0330 024 0820.

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