In the microcosm of the appliance industry, particularly within the UK, as we said recently not long before the referendum on the EU membership of the UK in general terms it doesn’t really make a lot of difference to the industry in brand terms so far as small independent repairers and retailers are concerned.
That isn’t however the whole truth and, we knew that when writing the previous article.
The reason we didn’t publish what would or may happen in the aftermath of what was realised as the eventual outcome, Britain leaving the EU, is that this is not a political website. We did not want involved in a debate about the pros and cons nor did we want accused of supporting one position or the the other so as to respect our neutrality on the topic.
Now it’s all over though, we can explore what may well be the immediate effects using fact, not rhetoric.
Currency Values
The big change will be in the value of the pound and the ramifications of the Pound’s value being low could be profound.
If you don’t know the appliance industry well you may not be aware that almost all the products and spare parts that are used are imported from outside the UK. This can be from EU countries and, just as much or more from outside the EU.
This means that, if the value of the Pound drops and remains low then the prices of those goods will inevitably have to rise. Of this there is no doubt, it will happen.
It is important to realise though that this will not happen immediately.
Price hikes will only come in as new stock or product arrives into the UK at a new exchange rate and, most companies will soak it up in the short term for the sake of stability and as things may bounce back to normal after a short period of time. We would think most will not do much in the immediate term.
Some may use it as an excuse to hike prices however, for some there may be some justification in that with especially smaller businesses being more immediately affected.
How much prices will rise therefore is not really possible to say but we’d think a month to three months, if the Pound doesn’t bounce back, would be a reasonable guess.
So far the UKP isn’t too bad in our view and no worse than it has been for some time, certainly at the time of writing no worse than it has been for a year really.
That means that for the time being, there should be no change and in this respect, most companies will see no change.
It is a fluid situation however and subject to change.
Markets
Markets we don’t see as a particularly strong indicator of what goes on in the appliance industry but, it does in a way.
If the markets do a nose dive then, as we saw, house builders and the housing market in general usually takes a kicking. This inevitably has an effect historically but, more on sales than on service in the immediate to short term.
What happens is that people stop moving home, which is a key driver to replace appliances or stop replacing kitchens, another big driver for appliance sales. If they die down, sales die down. A few months later, service dies down on the warranty side.
If that all happens in conjunction with a fall in the value of the Pound it’s bad news for the appliance business.
We saw this happen in the 2008 crash and there is no reason at all to believe that the same would not happen again.
Fuel
We all saw and we all recall the fuel prices spiralling upwards in price, it wasn’t that long ago that fuel was knocking £1.40 a litre. It was only in 2013.
Should fuel costs rise to that level again expect there to be fuel surcharges again on shipping costs of spare parts, finished goods and on service.
Moving On
We would not anticipate any immediate changes.
Fuel is volatile as are markets but the effect of changes there normally take a while to filter down. The only thing that may have a fast effect is with the service companies if they get slapped with a big increase on fuel costs, they will need to pass increased cost that on.
But we’re not even two days after the momentous and surprising outcome of the EU referendum have come to pass, quit what will unfold we cannot even begin to imagine. Therefore the analysis we can provide may be very limited. We think we’re on the right track, perhaps even on the money but with events unfolding it could all change.
