The pound has had a bumpy ride since Brexit, plunging after the referendum result and then steadying somewhat, before wobbling again with talk of ‘hard Brexit’ and suffering a dramatic ‘flash crash’ in recent days.
But what does a weak pound mean for UK business owners? Well, as we’ll see below, it isn’t necessarily always a bad thing…
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Which businesses will benefit from a weak pound?
Firms that export
If you sell goods abroad, the weak pound means you can sell your goods cheaper and possibly increase your profit margins, because foreign buyers need less cash to buy the same amount of goods. However, most British exports are relatively high value, which means prices aren’t usually as flexible as they are for lower value goods. Plus, exports currently account for just 17.3 per cent of the UK’s total economic output, and it’s mainly big companies rather than small businesses that stand to benefit.
If your business is fleet-of-foot enough to switch from a domestic market to a foreign market, you may be able to benefit from the boost to exports.
Businesses with overseas earnings
UK-based companies with predominantly overseas earnings stand to benefit, as a fall in the pound means these businesses are effectively bringing in more money.
A weak pound makes the UK more appealing to holidaymakers, as they get more currency for their money. Plus, more Brits are likely to opt for ‘staycations’ because foreign holidays have suddenly become more expensive. If you work in the UK tourism industry, this could be good news for your business.
Which businesses are negatively affected by a weak pound?
Businesses that import
A shaky sterling makes it more expensive for British businesses to import goods, and, as Brexit minister David Davis has pointed out, “We currently import £59 billion more from Europe than we export.” Whether you import food, finished products or raw materials, your profit margins will be squeezed and you may be forced to hike your prices.
Companies looking to recruit
The UK is a less attractive destination for foreign workers when the pound is weak, and more Brits are looking to work abroad, so if you’re trying to find new staff it could be a tricky time.
Businesses seeking investment
Market uncertainty makes the country less appealing to foreign investors, who may decide that UK businesses are not a safe bet for investment.
How will your business be impacted by the pound’s drop in value? Tell us in the comments.