Winners and Losers From Weak Pound

The recent depreciation in the Pound has had a significant impact on firms and individuals who trade and buy / sell from abroad.

Who Benefits from a Weak Pound?

• Firms selling goods abroad. A weak pound means UK exporters can sell their goods cheaper and / or increase their profit margins. Foreign buyers need less currency to buy the same quantity of UK goods.
• British Manufacturers. The depreciation in the Pound has given a boost to British Manufacturers.
• The UK current account deficit. A fall in the value of the Pound should help improve the UK’s trade balance as exports become relatively more attractive than imports.
• Kraft Trying to Buy Cadburys. Since Kraft gave its indicative offer on September 7, the Pound has fallen 2%, meaning the purchasing power of the US company has increased, putting it in a stronger position to offer more per share, if it wants to try a takeover of British Cadbury’s. (FT)
• Firms who can shift from selling to Foreign Market. If firms can switch sales from domestic to exports, they will benefit. This depends on their market and how flexible their business is.

Who Loses from a Weak Pound?

• British Consumers buying imported goods. Many imported items like food and electrical goods will become more expensive as the pound weakens. This will push up shop price inflation in the new year, especially as VAT will go back up to 17.5%
• British Tourists. That trip to New York or Paris will just be more expensive now the Pound is weak. (I was lucky to buy a new Macbook in New York in August before the recent depreciation)
• Firms importing raw materials. Firms who import raw materials from Europe are facing a large rise in costs.
• Inflexible firms who have no alternative but to import from abroad. Companies importing champagne or Spanish food items to sell to British consumers will be facing a tough time because the Euros strength has reduce their profit margins.

Related

• Weak sterling and effects on economy