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Sunday, March 18, 2018

Brexit D-Day. This Time We Will Not Be Crossing The Channel – But We May Sink Into It

Friday, 31st March 2017:

By Friday, 31st March 2017… Theresa May plans that Britain will have finally begun its exit from Europe.

But as it does, trigger-happy traders and EU bureaucrats could and probably will unleash a devastating attack on the Great British Pound… forcing its value to plummet… and making 95% of the UK population instantly poorer. I say 95% because as the likes of Michael Gove and Liam Fox have said this is a great opportunity. What they failed to add is the great opportunity is for those with massive amounts of excess cash to use the moment to further exceed their already great wealth as the pound plunges.

This has already happened with vast amounts being made as the pound tumbled following the referendum. So the 5% can look forward with glee to the next big payday thanks to Theresa May and her party of sociopaths.

There has, however, been a benefit for the British economy. Official data showed that retail sales leapt 1.4% in July following a drop in June – apparently helped by an influx of big-spending overseas tourists from the likes of the US, China and Hong Kong. So it’s good to know that those that voted for Brexit on the immigration question have helped overseas purchasers. Possibly not so good for all those retirees living on the continent though with the pound losing up to 30% and now facing a par with the euro. That’s a big piece off your pension. Could be with the further hits that will almost certainly come in March 2017 many of these pensioners will be returning to the |UK to live. I am sure it will not help the already struggling, underfunded NHS as these older people quite rightly start to make demands for their health.

So as we have seen the fall in the pound has been of value to those coming to the UK to shop. But what about those that live in the UK. Inflation was pretty low at just 0.6 per cent in August. Food prices are subdued thanks to the ongoing supermarket price war but that is dictated by the price the supermarkets pay for their goods, and as we have seen that is rising.

may5The price of imported food and other goods is rising because of sterling’s depreciation. And the price of raw materials for UK firms, which tend to be priced in dollars, is also increasing pretty rapidly. These increases will ultimately be passed on to customers in the form of higher prices. The Bank of England thinks consumer price inflation will spike above its 2.5 per cent target by the beginning of 2018. British shoppers should brace themselves for higher prices following the steep fall in the pound since the Brexit vote, Justin King the former boss of Sainsbury’s has said. Supermarkets would be unable to absorb the recent rise in the cost of importing goods caused by the falling value of the pound against the dollar and euro. Instead, said King, they would soon pass on the costs to consumers in higher prices.This means that the weekly food shop is likely to be more expensive relatively soon and will certainly increase again in March 2017 when Theresa May has her way.

It is inevitable that all imported goods will rise in price. Remember Thatcher made a good effort at killing our industries so we import most of our everyday items. Mike Rake, the chairman of BT has already said imported mobile phones and broadband home hubs were already 10% more expensive and the cost would have to be passed on to consumers in the near future. This will go for other items such as clothing and other consumer goods. Increasing our inflation even more as British workers salaries have less and less purchasing power. This is the price worth paying according to the likes of Gove, Farage, Johnson, Fox and May. Still they can afford it can’t they.

brexiteersNominal average wages rose at an annual rate of just 2.3 per cent in July – well below the pre-financial crisis average rate of around 4 per cent. If the pound’s fall does push inflation up, employers are unlikely to push nominal wages up to compensate. The result will be a new squeeze on the purchasing power of wages. So we now have a double whammy.

The fall in the value of sterling has also made some UK business assets look cheap. There was some suggestion that the takeover by Japan’s SoftBank of the UK chip firm ARM could have been influenced by the weakness of the sterling exchange rate. So foreign buyers now have the opportunity of purchasing UK companies at a knock down price. Of course this adds another double whammy, profits travel abroad and the company itself may well travel abroad if its owners see a disadvantage of being outside the EU.

2People taking on big new mortgages to move house should not feel any direct impact from sterling’s depreciation, assuming they are paid in sterling and they are buying in the UK. If they are buying abroad, however, they could face a problem because their money will not go as far as it did. Alternatively, if they are buying in the UK and they are paid in foreign currency they will have benefited. So foreign purchasing of ‘cheaper’ UK property could well lead to really absent landlords.


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