Sentiment -Brexit

Discussion in 'General Business Forum' started by Flashh, Oct 11, 2016.

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  1. Flashh

    Flashh UKBF Contributor Free Member

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    So I want ti see what folk think about the way the economy may be affected by brexit now that we have more sense of the line HMG will take.

    As an importer (and a fairly new one, with a growing business) I am quite worried by the impact on the euro/pound exchange rate (though my supplier takes the currency risk at present), and when I look at the macro economic picture and the possible impact on The City, I worry even more.

    Seems we are heading into a Force 12. My big worry is that my business is just about breaking even after 7 months (helped by super xmas orders) but I wonder whether in march, after what will be a very quiet start to the year (as always is in the food industry) whether the shock of the formal declaration of UK leaving the EU will be a hammer blow to consumer sentiment.

    How are people feeling, is it affecting your confidence too?
     
    Posted: Oct 11, 2016 By: Flashh Member since: Dec 9, 2015
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  2. deniser

    deniser UKBF Legend Free Member

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    Pound 19% lower against the dollar since the vote and I import almost everything. I don't know whether to hold out or close down. I have been surviving on old stock to date but come January I need to buy in large quantities again. I can't pass the increase to my customers - but will try - yet the drop in margin makes it hardly worth bothering at all. Just don't know what to do as it just seems it will keep getting worse.

    I just don't understand what Brexit voters were thinking.....
     
    Posted: Oct 11, 2016 By: deniser Member since: Jun 3, 2008
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  3. Flashh

    Flashh UKBF Contributor Free Member

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    My thought is hold and see (other than closing I think it's the only other option).
    I would agree with your sentiment. Much as I want to feel positive about Brexit ( no doubt there will be some positives, somewhere/somehow), at this point I don't see any real certainties other than uncertainty. Thanks for taking the trouble to share.
     
    Posted: Oct 11, 2016 By: Flashh Member since: Dec 9, 2015
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  4. sirearl

    sirearl UKBF Legend Free Member

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    I suspect brexit voters are more concerned with quality of life.

    I also suspect that the low pound rate may encourage the UK to restart manufacturing our own products,a bit late I know but the wealth of a nation is.............?
     
    Posted: Oct 11, 2016 By: sirearl Member since: Apr 23, 2007
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  5. Flashh

    Flashh UKBF Contributor Free Member

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    Thanks for your post. I think either way, we are all most interested in quality of life (I voted remain).

    My worry about manufacturing is that many of our raw materials are sourced from overseas, negating the effects of a low pound in many cases, as is much our our energy (gas/coal). I have friends in this situation, who already find it hard enough selling internally within UK, and now faced with no measurable export opportunities because their raw materials cost are increasing.
     
    Posted: Oct 11, 2016 By: Flashh Member since: Dec 9, 2015
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  6. Scott-Copywriter

    Scott-Copywriter UKBF Legend Full Member - Verified Business

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    It's not going to happen in any meaningful way. People need to let go of the idea that the UK will become a manufacturing powerhouse again.

    When the UK's average salary is £26,500, and China's average salary is around £4000, it's just an impossible task. Not to mention the dozens of emerging economies which are taking a slice of the pie.

    We cannot compete on cost unless we're willing to work for far less money, or pay far more for the goods we make. It's as simple as that.

    There's a good reason why the UK economy is 78% service-based. We'll always have a part to play in skilled manufacturing, such as automotive, pharmaceutical and aerospace, but beyond that, we can't even get close to competing with the salaries we expect and the living costs we have to pay.
     
    Posted: Oct 11, 2016 By: Scott-Copywriter Member since: May 10, 2006
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  7. atmosbob

    atmosbob UKBF Ace Free Member

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    Dropped into a business for a coffee yesterday and the conversation was all about how to introduce the inevitable price increases. One big problem is that good UK factories are already at full capacity. If production switches from overseas back to the UK delivery times will increase. While it may be possible to take up slack with more overtime there are limits. Finding properly trained and skilled workers in a hurry is very difficult.

    The only thing to console yourself with is that all your competitors will be in the same boat. Also a lot of your competitors on tight margins will go out of business leaving the field clear for you.
     
    Posted: Oct 12, 2016 By: atmosbob Member since: Oct 26, 2009
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  8. Gecko001

    Gecko001 UKBF Enthusiast Free Member

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    Since all your competitors will probably be in the same situation, it is probably be a case of who has the deepest pockets to cling on to their market share, but all will eventually have to increase prices.
     
    Posted: Oct 12, 2016 By: Gecko001 Member since: Apr 21, 2011
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  9. Gecko001

    Gecko001 UKBF Enthusiast Free Member

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    Yes it is good that manufacturing will get a long over-due boost. It will also be a boost to the services sector who supply their services abroad. I am thinking film and video industry, graphic design, engineering design (my sector) etc. Even gaming and the lowly blogger will be seeing their income increase no doubt..
     
    Posted: Oct 12, 2016 By: Gecko001 Member since: Apr 21, 2011
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  10. Scott-Copywriter

    Scott-Copywriter UKBF Legend Full Member - Verified Business

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    Any supposed gains in manufacturing due to being more price competitive with the falling Pound will be wiped out when it costs manufacturers considerably more to buy what they need from overseas to actually do the manufacturing.

    Nor is it easy to just flip back and forth between suppliers depending on prices in any given day. Many manufacturers will have long-standing and complex supply chains based on custom needs.

    The fact is we are not China with a population of 1.3billion, nor do we have a wealth of natural resources where we could be self-sustaining in everything we do. We rely on globalisation and we rely on trade with other countries.

    You can trace these needs right through the supply chain. Take semiconductor and microchip manufacturing, for example. They are dependent on dozens of rare earth elements, as well as precious metals such as platinum and gold.

    We simply don't have enough of those elements and minerals within the lump of rock we call the UK, nor would it be cost-effective to spend tens of billions trying to retrieve the limited resources we do have.

    This means, no matter what we do, various electronics supply chains will eventually form back to China, which supplies 90%+ of the world's rare earth elements. With the fall in the Pound, they will already be coming far more expensive for the UK's small number of semiconductor firms - amongst thousands of other things for other industries.

    I've noticed that every time the positives of Brexit are highlighted, they're always based on incredibly over-simplified theories. It's like the skills, employees, resources and parts can just appear out of thin air in a matter of weeks.
     
    Posted: Oct 12, 2016 By: Scott-Copywriter Member since: May 10, 2006
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  11. Gecko001

    Gecko001 UKBF Enthusiast Free Member

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    Wiped out?
    You are only taking into account costs associated with goods from overseas. Costs such as staffing, power, and rent etc. will not go up in proportion to the fall in the pound - also the goods still being sourced from UK.

    BTW I voted to remain. Trying to be positive about a pretty bad situation
     
    Posted: Oct 12, 2016 By: Gecko001 Member since: Apr 21, 2011
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  12. Flashh

    Flashh UKBF Contributor Free Member

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    Thanks for all the comments everybody...

    ...however in response to Gecko001 I would say that I would expect increases in food prices, power (we buy much of our energy on the international w/sale markets) and consumer goods, so I cannot see how there would not be some upward pressure on wages and therefore costs...

    .....unless we become poorer!

    The latter seems a more likely scenario.

    I want to believe we can start trading more closely with the commonwealth (30% of the world's population), which I see as an opportunity for us, but cant fathom how long it would take for the effects to show through and confess i do not understand micro economics enough to know whether there really is an opportunity here or not.....

    I wonder what Private Fraser and Private Jones would say about all this...?
     
    Posted: Oct 12, 2016 By: Flashh Member since: Dec 9, 2015
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  13. MBE1

    MBE1 UKBF Enthusiast Free Member

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    Change is a fact of life and business, people will have to adapt or go under.

    Too late now, but for a simplistic viewpoint, the politicians, and many would argue big business leaders have led us to this decision, too many people in the UK felt disenfranchised from the wealth others were enjoying. Whilst the majority of the UK has seen a drop in living standards over the last 10 odd years, top business leaders, banks bosses etc see huge annual increases, what do people expect?

    Something was going to give sooner or later, at least no-one died in a revolution, well, not yet anyway. We live in an era of instant pop stars, footballers earning more in a year than most make in a lifetime etc, the whole system needs a better balance, but this will lead to tough times for many.

    Brexit was also an emotional decision for many, the idea of regaining a country and the power to help decide it's course, point being everyone needs some of the pie, not just 90% of wealth going to the top 5%, which probably helps explain why Corbyn has become leader of an unelectable party.

    Interesting times ahead, but money is not everything, and the idea of tough times to so many living already in tough times leaves little to fear for them, more the middle earners who will have to learn to live within their means who will truly struggle.
     
    Posted: Oct 12, 2016 By: MBE1 Member since: Jun 1, 2012
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  14. Scott-Copywriter

    Scott-Copywriter UKBF Legend Full Member - Verified Business

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    Yes, because the gains in manufacturing from the fall in the Pound are not likely to be large or concrete in any way.

    To see any substantial, sustainable improvements, the more competitive nature of UK manufacturing would have to persuade companies to invest in larger plants, bigger capacities and more staff.

    It's also dependent on whether we don't just become more competitive, but become competitive enough to the point where existing export buyers switch to our companies instead. UK manufacturers need more customers, more sales and more contracts to ramp up production.

    This is where uncertainty rears its ugly head. With a volatile Pound and no idea of what the trading situation for the UK will be in terms of FTAs and tariffs once we've left, few are going to take the risk. Any better value could be suddenly wiped out by a single tariff.

    In fact, if any companies do invest more in UK manufacturing due to the Pound's value, it may be a sign that they expect the Pound to fall much further long-term.

    I appreciate that you're trying to remain positive, but I just can't see any situation where the positives of what's going on right now are not cancelled out by something equally (or more) worse.
     
    Posted: Oct 12, 2016 By: Scott-Copywriter Member since: May 10, 2006
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  15. Flashh

    Flashh UKBF Contributor Free Member

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    Posted: Oct 12, 2016 By: Flashh Member since: Dec 9, 2015
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  16. atmosbob

    atmosbob UKBF Ace Free Member

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    Goods and materials coming into the UK for further value added manufacture have benefited hugely from the rules defining free movement. In other words if a UK merchant, wholesaler or agent charges more than a supplier anywhere in the EU you are entitled to import direct. This had an immediate beneficial effect when we joined the EEC and EU.

    Because of the UK's traditional pernicious role of wholesale merchants some costs of materials are much more expensive in the UK and are likely, upon Brexit, to go back to the old rip-off days. To give just one example most European printers buy stock direct from the paper mills. Some of those papers are considerably more expensive here because they go through a UK based merchant.
     
    Posted: Oct 12, 2016 By: atmosbob Member since: Oct 26, 2009
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  17. Flashh

    Flashh UKBF Contributor Free Member

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    sorry, not sure how to quote and comment in same box! yes, i do agree with the above from MBE1, i think there has been a disenfranchisement, and have seen this myself.
     
    Posted: Oct 12, 2016 By: Flashh Member since: Dec 9, 2015
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  18. Scott-Copywriter

    Scott-Copywriter UKBF Legend Full Member - Verified Business

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    We need global change for any meaningful change in wealth distribution. Any attempt to do this ourselves whilst other countries don't just sets us back.

    The problem is the wealthy and powerful have easier access than most to better financial havens. Companies and the elite should pay more tax, but charge them too much tax and they'll simply leave for more profitable locations. When that happens, you don't get a little bit of some tax revenue - you just get none at all.

    It baffles me when people claim that the Conservatives reduce taxes on the wealthy to help their "friends". It's to make the UK a more attractive place for companies to invest in which then increases tax revenues, jobs and productivity. Go in the opposite direction, and it simply drives them away. We can't force companies to invest in this country. We have to make it appealing like so many other countries are trying to do. There is a balance to be had though, of course.

    It's frustrating, and puts many countries in between a rock and a hard place, but that's just the way it is when tax competition exists between almost every major nation. The EU tried to solve this by getting every member to tow the same line, but we decided to leave.

    Now, we may have the power to make our taxes more competitive, but I suspect that the British public will be up in arms if we dare to give any further cuts and incentives to big businesses.

    In short: we can't win.
     
    Posted: Oct 12, 2016 By: Scott-Copywriter Member since: May 10, 2006
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  19. MBE1

    MBE1 UKBF Enthusiast Free Member

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    As with anything, it will be down to how it is sold. More of the same and it would be rejected IMO, but if sold in a better more open way then the public might even back further cuts.

    If workers were rewarded in line with salary increases of the top managers would they complain? I doubt it, but I'm sure the top managers would complain. Workers understand their future is linked to the companies/countries success, but they have consistently been left behind for forty years or so whilst the elite award themselves enormous and often totally undeserved annual increases, and lets not forget pensions, share options, private medical health benefits etc.

    Some companies do look after their workers, they still seem to do well, John Lewis is just one example, so it can be done. I am not a raging commie BTW, quite the opposite, but simple fact of life is people demand to be treated fairly, or you better watch out.

    As a soverign nation we can address many issues, I would for instance like to see a simpler tax system to avoid the likes of Amazon moving profits abroad to be taxed to the lowest bidder, so why not simply change the law, and state a set percentage on income/turnover is required, ie 20%. Amazon can move what they want, but if the sell £1 billion in the UK then 20% is required, end of.

    They would simply adjust prices, they would not stop trading in the UK, nor would Starbucks, Costa etc, all who make fortunes and pay very little in return. A fair tax on this missing money would bring the idea of equality a long way back to where it should be. If the likes of Costa etc do not like it, let another coffee company take their place.
     
    Posted: Oct 12, 2016 By: MBE1 Member since: Jun 1, 2012
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  20. Scott-Copywriter

    Scott-Copywriter UKBF Legend Full Member - Verified Business

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    Sounds great in principle, but then you have double taxation problems:

    https://en.wikipedia.org/wiki/Double_taxation

    The UK, and almost every other major economy, has signed treaties with hundreds of other countries to avoid double taxation issues.

    With a system like that, we'll take a big cut, but the country where the company is based will want their cut as well. This then runs the risk of businesses being harmed and cutting jobs because they're being taxed too much in total from two different locations.

    This is further compounded by disputes breaking out between countries. For example, if Apple was taxed on their UK sales, Ireland would be mighty unhappy that one of their biggest multinational investors (Apple has their European HQ in Ireland) was having their financial strength hit by UK tax laws. Then there's the issue of expenses. Could Apple write off UK tax as an expense for their Irish accounts? If so, that would immediately reduce what Ireland earns in tax revenue from them.

    It's a complicated mess, to be honest, but the capitalism-focused global economy is an unstoppable train. It has helped this world in many positive ways, but it's very difficult to reign in when it goes too far.
     
    Posted: Oct 12, 2016 By: Scott-Copywriter Member since: May 10, 2006
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