In Brexit Britain, only the few win as pound crashes

When Brexit first drove up the cost of importing ingredients like jasmine rice, curry paste and coconut milk from Thailand, London restaurant owner Saiphin Moore travelled to her native country to cut out the middlemen.

In Brexit Britain, only the few win as pound crashes

When Brexit first drove up the cost of importing ingredients like jasmine rice, curry paste and coconut milk from Thailand, London restaurant owner Saiphin Moore travelled to her native country to cut out the middlemen.

By finding farmersand manufacturers to supply herdirectly, she cut costs by 15%, helping her 17-chain Rosa’s Thai Cafe weather the pound’s decline. Until now, that is.

As the risk that Britain will tumble out of the EU leads more traders to bet sterling is headed for 34-year lows, Ms Moore is concerned another big depreciation will be too much to bear for her business. She imports nearly 70% of ingredients andemploys many Thai nationals.

“I’ve never been this worried,” Ms Moore, 51, said. She and her husband opened the restaurant in Spitalfields during the recession 10 years ago, when the pound was 40% stronger against the Thai baht.

Britain’s messy divorce withEurope is hitting entrepreneurs like Ms Moore hard because the currency fluctuations make it virtually impossible for them to manage stock.

Yet a stroll down British streets reveals that for all the business owners dreading the drama that will unfold as the October 31 deadline nears, there are some quietly celebrating the weaker pound.

Managers like Sukhinder Singh, who owns specialty whisky retailer, The Whisky Exchange. The more the pound tumbles — it fell as much as 5% in recent months alone — the cheaper it gets for foreigners to buy expensive British-made spirits.

“It’s saved us,” Mr Singh said of the pound’s retreat.

“The weak pound has helped us because it has brought more international customers,” he said.

Regardless of which side of the Brexit currency divide a business owner falls, what’s certain is small and medium-sized companies are in for a rocky ride as Prime Minister Boris Johnson

pledges to exit the EU “do or die” by the end of October. Some analysts even warn the pound could fall to parity with the dollar, if a hard Brexit unfolds. Betting odds assign an almost 50% chance of that happening. “I don’t think the risk of no-deal Brexit is fully factored in,” said Philippos Kassimatis, a co-founder at hedging advisory firm Maven Global.

While large companies have the cash to pay millions of pounds to protect themselves against currency swings, smaller ones, as in Ireland, can’t afford this luxury. Instead, managers like Ms Moore are looking for alternative ways to cope.

Here’s a glimpse at some ofthe other losers — and winners — from the pound’s relentless drop.

Britain was already the most popular academic destination after the US and the weaker sterling is only driving the appeal. International student enrollments at UK universities rose to 458,520 in the 2017-2018academic year from the average of 432,546 in the three years prior to the Brexit referendum, according to Studying-in-UK.org.

“I heard of cases back home where some students are choosing UK instead of the US for postgraduate programmes because of sterling,” said Mia Chen at Warwick Business School.

Chinese nationals are the biggest group of foreign students in the UK and applications for undergraduate programmes in Britain have surged 30% from last year, Universities and Colleges Admissions Service data show. The jump may also reflect US restrictions on academic visas.

The weaker pound has contributed to boosting tourist arrivals to the UK, which are likely to reach 38.9mvisitors this year, nearing a record set in 2017, according to VisitBritain. They will probably spend about £24.5bn (€27bn), matching theall-time high in 2017.

But there are many losers. Struggling retailers like Debenhams, Topshop, and Marks & Spenceralready face the toughest conditions in a decade, according to the British Retail Consortium.

UK retailers often get their stock from the Middle East and pay for it in dollars, anytime from seven to 120 days after delivery, according to Richard Hyman, an independent retail analyst. This means many companies haven’t yet felt the pain of the latest bout of pound weakness this summer. Retailers also hedge their currency exposure, but “you can only hedge so far”, said Mr Hyman.

“The second reason it’s so difficult is it comes at a time when UK retail is already on its knees,” he said.

And for pensioners and retirees living abroad like Roger Boaden,the falling sterling is hurting. Mr Boaden, 79, and his wife moved to France in 2002 in search of a standard of living they could no longer afford in the UK. But since November 2015, the value of his British pension has dropped by more than €500 a month.

He now monitors the exchange rate every day.

“You’ve just got to live with it because there’s nothing you can do about it,” said Mr Boaden.

“When it’s high we know we’ve got a bit of spare cash and you can go on outings and what have you. When it’s low you just say we won’t go out this month,” Mr Boaden said.

- Bloomberg

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