Retailers to increase prices in wake of falling sterling

London - UK retailers are expected to increase prices in the wake of the falling pound. Leaving the European Union will have economic consequences that are becoming ever closer to reality, and shoppers could soon seen an added 5 per cent to shopping bills. The hikes, expected to hit soon after Christmas, will cost consumers an estimated 15 billon pounds next year, according to the Mail on Sunday, despite leading executives from fashion retailers and suppliers issuing warnings before the vote.

Shoppers will inevitably face price rises on virtually all goods. Imported items will cost more, but so will things manufactured in the UK, due to the rising price of commodities such as petrol and raw ingredients. A five per cent rise across the entire 300 billion pound retail industry would mean shoppers will be faced with a 15 billion pound rise in bills.

The weak pound is complicating retail mergers and takeovers

The weak pound has further complications in the investment sector. In the latest high-street takeover, JD Sports is facing issues caused by the rising cost of imports. Retailers are facing significantly higher import costs and the threat of duty tariffs, which deal-makers say has made their negotiations more difficult. JD Sports has been in talks to buy Go Outdoors since before the EU Referendum vote in June. However, the deal that would cement its status as the UK’s biggest sportswear retailer, have stalled several times due to tense negotiations over price.

According to the Telegraph, the falling value of sterling has also delayed sale plans for one of the country’s biggest discount retailers, The Original Factory Shop (TOFS), until next year. Owned by private equity firm Duke Street Capital since 2007 and has more than 200 stores across the country. Rothschild was appointed in June to explore the TOFS’s options and last month the company hired former Matalan boss Alistair McGeorge as its new chairman, a move experts saw as a sign of an imminent change of owner. However, bankers said the process had been very quiet and highlighted the company’s profits will be under pressure from a hefty increase in import costs because most products are made overseas.

The British Retail Consortium has warned that shop prices will have to rise as retailers struggle to absorb an increase in costs. Next has already said it may have to raise prices by up to 5 per cent next year. Mountain Warehouse warned that it would have to raise prices for the first time in five years to cover higher costs and it was shelving flotation plans.

Last week Rachel Lund, head of retail insight and analytics at BRC said reports of businesses’ reluctance to invest could slowly feed through to consumers and hurt their spending power. “We are also likely to see some upward pressure on prices as we move into 2017 as retailers increasingly feel the impact of exchange rate movements, although the level of competition in the industry may mean increases are more muted than implied by the scale of the devaluation,” Lund stated.

Photo credit: British Retail Consortium Facebook