British consumers are starting to bear the costs of Brexit, with companies raising prices of everything from cars to carpets to counter a plunge in the pound caused by the UK’s vote to leave the EU.
French carmaker PSA Group lifted prices of its Peugeot, Citroen and DS vehicles by an average of 2% at the start of the month.
The increases make up for part of the pound’s 10% drop against the euro and its 13% fall versus the dollar since the June 23 referendum.
While some companies have stood firm on prices, worried about losing market share in competitive UK businesses like groceries, others are moving quickly to pass along the effects of the weaker pound.
The increases underline forecasts for an uptick in inflation after the country flirted with deflation last year.
Alan Clarke, an economist at Scotiabank Europe, said it was “unusual” for companies to blame the Brexit referendum for cost increases they passed along so quickly.
Typically there’s a six- to nine-month lag between big moves in exchange rates and shifts in consumer prices, he said.
“I think you’ll have some opportunistic companies. Whether people actually buy those products or they get discounted at sale time, we’ll have to wait and see,” he said.
Some industries, like tourism, are more sensitive to exchange rates than others, like electronics. While British travellers hitting the beaches of Spain or Italy need to convert pounds to euro, pricing of consumer gadgets is more complicated.
In the economic recovery that followed the 2009-2010 downturn in the UK, the pound rose along with prices of devices like portable music players because of increased demand, Mr Clarke said.
Since the referendum, PC maker Asustek Computer has said it plans to raise UK prices by 9% in October, while Dell said in a statement that the weak pound “will have a direct impact on the price we sell some of our products to our UK enterprise customers”.
Smartphone company OnePlus has lifted the price of its flagship phone to £329 (€383) from £309 (€360). HTC marked up its Vive virtual reality headset by £70, to £759, from August 1.
Headlam Group, a UK distributor of floor coverings, has said it will raise prices, while US-based carpet provider Mohawk Industries said it plans to adjust its European pricing “relative to where the pound has been”.
The fall in the pound is one of several factors that could lift consumers’ bills. Depending on the outcome of the Brexit negotiations, the country might reimpose tariffs on imported goods.
UK consumer prices climbed an annual 0.5% in June. The Bank of England forecasts that inflation will accelerate through this year and next, hitting its 2% target at the end of 2017.
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