‘Big impact’: UK economic chaos, pound plunge hit businesses
LONDON Harry Niazi, like many small business owners in Britain, hoped for government assistance to keep his South London fish and chip shop open despite skyrocketing energy costs and rising inflation.
But the economic stimulus plan that Prime Minister Liz Truss announced last week did not provide any relief.
For millions of people in the United Kingdom, things got worse after the promise to huge unfunded tax cuts caused turmoil in financial markets. This led to the British pound falling to a record low against U.S. dollars this week.
“Everything’s based on the dollar — diesel for the vessels to catch the fish, trucks to deliver our products. It has a huge impact,” Niazi stated from Olley’s Fish Experience, his takeout restaurant.
The pound’s slide has been devastating for many businesses because imported materials and commodities such as natural gas, which are priced in dollars, will be more expensive. Businesses will likely be forced to pass the costs on to consumers, which would further push up inflation — already close to a 40-year high at 9.9%.
This would make it more difficult for people to pay their energy bills on Saturday. However, Truss’ plan stopped a more severe 80% increase in natural gas prices.
” I’m afraid of raising my prices. We have a lot of customers, and we don’t want them to go. But every day, prices go up. Niazi stated that he doesn’t know how he and his team will cope.
Hadock, cod, and other white fish that he imports are priced at dollars. This cost has risen since July when the UK imposed a 35% tariff to Russian seafood imports as part sanctions for the war in Ukraine. Other businesspeople, such as Sanjay Aggarwal (co-founder of Spice Kitchen), are concerned about the falling pound. The Liverpool-based company sells gift sets of Indian spice mix in steel tins made by Indian manufacturers.
Tins, shipping — the two largest costs for his business — are both listed in dollars.
Aggarwal stated that he has had to raise his prices this year due to rising steel prices. Shipping costs have also risen since the bottom of the coronavirus pandemic. The cost to ship a container from India to Britain has quadrupled since 2020 to about $8,000 to $9,000, he said.
His most recent shipment is on its way in time for Christmas. However, he is expecting a price shock when it comes to placing his next order. We are affected because we play on a global level,” stated Aggarwal. “So any future orders we now place, it’s going to cost us 20% more.”
Beyond Britain, the dollar has hammered many other world currencies, fueled by the U.S. economy performing better than others and aggressive Federal Reserve interest rate hikes drawing investors. The dollar’s strength also has pushed the euro below parity and sent China’s yuan to a 14-year low. The U.S. Dollar Index, which measures the greenback against six other major currencies, has surged 18% this year.
The Wine and Spirit Trade Association of Britain warned that the falling pound will “set up prices for consumers and threaten hundreds if British jobs in bottling plant across the U.K .”
The trade association stated that a fifth of bulk wine imported to the U.K. to be bottled comes from the United States.
Miles Beale, the group’s chief executive, said that although the government’s measures included “laudable” plans to freeze alcohol duties, “the pound tanking against the dollar has both usurped them and delivered a significant blow for U.K. wine businesses and consumers.”
The mood of uncertainty has heightened since the government unveiled a plan to cut 45 billion pounds ($48 billion) in taxes but no details on spending reductions, meaning they will be funding by public borrowing. Officials want to spend billions more on subsidizing businesses and individuals’ steeply rising energy bills.
Investors and economists were concerned about the rising government debt and warned that the plans could lead to higher inflation and a cost-of-living crisis.
Although the Bank of England has not yet taken any action to increase its emergency interest rates to offset the inflationary effects of the pound’s slide, many people expect it to do so soon. This has caused panic among homeowners who have been used to low interest rates for years, around 2%, and are now worried. Many homeowners will find it difficult to afford mortgages if borrowing costs rise suddenly.
Dee Corsi is chief executive of The New West End Company. This group represents hundreds of shops, restaurants, hotels, and restaurants in London’s famous Oxford Street shopping area. She said that she is certain that consumers will be worried about these worries.
“The weaker pound may help us in the short-term, Corsi stated.
“But the longer-term, the lower pound will increase the cost of imports for businesses,” she said. “And with the cost-of-living crisis — we can’t not talk about that — and with mortgages going up, I absolutely think people will be more cautious with their spending.”
For some business owners, the Conservative Party’s divisive economic plan might be alienating them in other ways, too.
Niazi is a Conservative Party voter, but he said he was disappointed in the government and would not vote for the party in the next election.
” I don’t know much about running the country but I know that the government is hurting everyone,” he said.
” “It’s not working. Something’s gone wrong,” he said. “They need to fix it.”
I have been writing professionally for over 20 years and have a deep understanding of the psychological and emotional elements that affect people. I’m an experienced ghostwriter and editor, as well as an award-winning author of five novels.