Brexit and the UK Economy – The Marmite Test26-10-2016
To say the UK’s economy post-referendum has had its ups and downs would be putting it very mildly indeed, but as the pound becomes weaker, together with higher inflation, it is looking increasingly likely there will be a hit on living standards. The pound is hovering around the $1.22 mark, which is 18% lower than the day of the referendum, some four months ago and at its overall lowest level for more than 30 years. Its future worth is made more precarious by growing speculation that Article 50 will be trigged before the end of March 2017.
The ripple effect of this drop in the pound is already being felt by everyday consumers. Only last week, the food, toiletries and household goods supplier, Tesco became locked in a bitter spat with its major supplier, Unilever, over its supply of familiar household products such as Marmite, PG Tips and Comfort fabric conditioner. Stocks of such items have started to dwindle after Tesco bosses refused to accept a 10% price increase proposed by Unilever in response to the weaker pound. Love it or hate it, Marmite has been a firm favourite within homes up and down the UK for many years and the reality of losing such well-known brands from our supermarket trollies is really starting to bite with consumers.
Unilever have stated that its prices must rise by 15% which heralds a definite change to what we might usually see in our supermarket basket.
However, it isn’t all rain and gloom, there is a beacon of light on the horizon, with the flipside of Sterling’s shaky fortunes being an increase in tourism providing a welcome economic boost. Tourism remains our fourth biggest service export and it is fast becoming a potentially valuable market post-referendum. As a result of Sterling’s sudden depreciation following the result in June, it is now becoming much more financially desirable for foreign travellers to visit the UK. A major promoter and advocate of travel to our shores, VisitBritain, has said there was a notable boost in incoming tourism to Great Britain in 2015, with a record 36.1 million inbound visits triggering spending of £22.1bn. The importance of inbound tourism has not gone unnoticed, with Prime Minister Theresa May launching an action plan to promote Britain’s place in worldwide tourism.
Love it or hate it, Brexit is a legal separation heading for divorce in the next five months. It will be interesting to see whether relations between Member States can remain amicable for the sake of its dependents.