On June 23rd of this year, a referendum was held to decide whether the UK should leave or remain in the European Union (EU). With a turnout of 71.8% of eligible voters, leave won by 52% to 48%. The reasons behind the vote were multifaceted with those voting to leave citing a lack of sovereignty and an overly controlling EU that imposed far too many rules in addition to a large fee for membership. The issues run much deeper than this oversimplification and the full ramifications of Brexit itself are well beyond the scope of this post. I suggest anyone even remotely interested in this topic seek out reliable outlets for additional information on this historic and world changing vote. While it will be many years before all of the consequences of this motion are realized, one of the more immediate results has been a significant decrease in the value of the British Pound. The Pound has dropped by 18% against the US dollar and Euro compared with one year ago and hovers near a 30 year low. What this means is that British buying power is reduced and the costs of imported goods inevitably must go up. Inflation is also a real concern though this has relatively been kept in check to date. Many experts don’t expect the full economic weight of the vote to come to bear until 2017.
Some early examples of rising cost can be found amongst the tech industry. Microsoft has stated that business software will rise by 13 percent and cloud services will see a 22 percent increase beginning in January 2017. Dell increased pricing to UK retailers by 10%. OnePlus, a Chinese smart phone company, raised prices by about 6.5%. Apple, Sigma, and dozens of other companies have made similar moves while others hold back and try to delay price increases for as long as possible. Not all of these increases will get passed onto consumers, at least initially. Many companies build a small buffer into their budget to account for minor fluctuations in exchange rates which prevents the need for frequent price adjustments. The dramatic fall of the Pound following the leave vote, however, is too great to be absorbed by any of the usual mechanisms indefinitely. Retailers continue to be driven by the goal of sales and therefore will naturally delay increasing prices for as long as possible in order to remain competitive and not drive away business. That competition will help to keep prices down, forcing retailers to make cuts in other areas such as jobs. Eventually though, the increases can not be absorbed and must be passed onto the customer.
This brings me to the situation with sales of Pelikan branded goods. Located in Germany, Pelikan’s products are imported into the UK. British businesses such as Niche Pens must buy their wares from a Pelikan distributor who deals in Pounds. The distributor buys directly from Pelikan in Euros and therefore the distributor’s costs go up as the value of the Pound falls. While exact figures are not yet clear, it is anticipated that Pelikan’s products will see a 10% increase in the UK starting in November. Ross Adams of Niche Pens has informed me;
“We have had to increase some of our prices by around 10% as and when our stocks sell out at the old price and more will follow in the coming weeks. I did email our past customers to let them know of the plans so that anybody looking to buy a pen as a Christmas gift would have some notification of an intended price increase.”
Despite the increase already being in effect, the consumer isn’t likely to notice the rising prices immediately. As old stock piles are purchased at the former pricing and stores are depleted, new stock will be replenished at the higher pricing which will then prompt consumers to reach more deeply into their pockets for that next purchase. With the holiday season around the corner, this could be costly as the last of the old stock gets bought up. This may have the unfortunate effect of reducing sales for vendors as consumers begin to look elsewhere for more competitive pricing or hold off on purchasing all together.
Not withstanding the above surge in recommended retail pricing, the cost of these products to consumers in the UK remain much less than that of the United States market which is a distressing issue in itself. Of course, today’s more favorable exchange rate for US buyers means that UK vendors should remain a viable alternative for US consumers looking to get more value for their money. Those living and purchasing fine writing instruments in the UK will most acutely feel the burden of the currency fluctuation.