Tuesday, November 28, 2017

Brexit makes Christmas at least 20% dearer

There are many Brexiters who will insist that there has been no discernible effect on Britain's economy because of the EU referendum vote. It is true to say the Brexit effect has been a slow burn. But nonetheless there have definitely been repercussions. And the repercussions are manifesting themselves with higher shopping bills.

Weak pound & fewer migrant workers

The pound has barely lifted after its dramatic drop the day after the referendum and remains more than 13% down from its pre-Brexit levels.

While there hasn't been a mass exodus from the City or from Britain's ailing manufacturing industry [Reuters] there have been some departures and concerns raised by others  [Verdict]. And while some firms talk of leaving, many migrant workers are failing to turn up in the numbers seen before the EU referendum.

There were many Leave voters driven by the issue of immigration. However the situation that has resulted from the vote brings one's mind to focus on that age old adage 'be careful what you wish for'.

An exodus of many EU migrants and a drop in numbers coming to Britain to work has resulted in shortfalls in the NHS and also in Britain's farms where there are reports that vegetables are now rotting in the fields.

Farmers & NHS see shortfall in workers

In June this year it was reported that there had been a 96% drop in EU nurses registering to work in Britain since the Brexit vote. Official figures showed only 46 nurses came to work in the UK in April, down from 1,304 in July the previous year [Guardian / BBC].

The effect in the NHS has yet to be seen. But a fall in the number of migrant workers in the farming industry is already having a marked effect. One survey conducted for the National Farmers' Union revealed that there was a 29% shortfall in seasonal workers for horticulture businesses in September 2017, raising the average shortfall for the year to 11%.

The survey also showed that the number of returning workers to farms, a critical source of the workforce, fell to 16%, its lowest level all year. The returnee rate had been as high as 65% in January.

"The perception from overseas is we are xenophobic, we're racist, and the pound has plummeted too. We've gone with Brexit and that makes us look unfriendly," says John Hardman, director of Hops Labour Solutions, which supplies about 12,000 workers a year to food-growers, those numbers are dropping fast [FT / EDP24 / Farming UK / Guardian].

Moulding fruit & rotting vegetables

And as the numbers of workers drop, so the yield from British farms drops too. And there are reportedly already shortages of main staples in the shops.

According to some reports there are already shortages of traditional festive items such as parsnips, Brussels sprouts and even potatoes [Daily Star].

Last year some papers joked over the price of chocolate coins that are often bought as stocking fillers [Mirror / Coventry Telegraph].

However a year on the low value in sterling and a decline in seasonal workers within the agricultural industry has brought less amusing anecdotes.

Inflation & prices rising

Inflation is now running at 3% and shoppers are beginning to notice. Official figures show prices were up by 4.2% in October compared to a the previous year [Guardian].

But this is far from a true picture. In fact some products have increased by around 30% with butter having increased some 40% [Guardian].

A comparison of prices on a selection of products at a Sainsbury's supermarket over the course of a year is just one small indicator as to how much prices have risen.

President butter has increased from £1.50 to £2.00, a 30% increase since October 2016. Meanwhile, fish has significantly increased in price. Even home produced Scottish salmon has jumped from around £3.50 to £4.50 for a 2 fillet pack. That's a 28% hike.

Other big price jumps have been seen in breakfast cereals. A 600g pack of Cheerios has risen from £2.95 to £3.50, an 18% price increase. Meanwhile a jar of Sainsbury's own brand olives £0.85 in October 2016, is now £1.00, a 17.6% increase. A pack of tagliatelle has only edged up from £0.75 to £0.85, but is still a 13% increase. Broccoli was £1.10 in October 2016 and is now £1.30 a kilo, an 18% increase.

Some increases have been less dramatic. For example Andrex 16 pack toilet rolls were £6.00 in 2016 and are now £6.50, an 8% increase.

Main staples have either remained the same or only risen slightly. Eggs have increased with a 15 pack edging up some 2.5% from £2 to £2.05. Meanwhile a 2.272 litre bottle of milk is still a pound as is a 500g carton of Sainsbury's own brand Greek style yoghurt.

Family shop £1,000 more per year

But overall, prices have risen between 10% and 30%. A few pennies here and there may not be immediately noticeable. However, for weekly shops that were once £100 consumers are now spending anywhere between £440 and £520 a month. Over the course of a year that could equate to between £480 and £1,440 extra being spent by families just on shopping.

For more well off families the cut backs will simply be less bottles of wine and chocolate treats. But for those already struggling the fall in Sterling is going to bite, and bite hard.

This is only the beginning as many retailers have held back on passing on costs to consumers. Brexit, and particularly a hard Brexit, will bite very hard indeed in the months to come.

Perhaps the only advice is to stock up on the non-perishables whenever there's a good offer.

A bleak Christmas & a bleaker new year

But even good offers have failed to excite consumers. This year's Black Friday was still a bonanza for retailers, but early indications appeared to show consumers were far more savvy. Online retailers also did better than the traditional high street stores [BBC / Bloomberg].

As purse strings tighten more and more people will begin to question the so-called bargains they are being offered [Independent].

Christmas 2017 is certain to be at least 20-30% more expensive. The annual yuletide food survey by Good Housekeeping magazine found that the cost of the cheapest set-piece meal on Christmas Day – for 8 people and including 11 ingredients from turkey to fresh vegetables and cranberry sauce – had risen from £19.82 to £23.53, or from £2.48 a head to £2.94.

The Good Housekeeping basket comprises of a whole turkey weighing at least 3.5kg, at least 880g each of potatoes, sprouts, carrots and parsnips; stuffing mix; a jar of cranberry sauce; at least 900g of Christmas pudding, Christmas cake, at least eight mince pies and a jar of brandy butter [Guardian].

There might be some savings to be made by hitting Lidl or Aldi over Sainsbury, Waitrose or M&S, but even the budget stores have increased their prices.

This week the Brexit secretary David Davis finally handed over heavily redacted Brexit assessment papers to the select committee which drew ire and condemnation from MPs who suggest the government was attempting to cover up the impending disaster that is to come with Brexit [Guardian / BBC].

However, one does not need to see the impact assessments to get a indication of how disastrous Brexit will be. One only needs to check one's shopping receipts.

tvnewswatch, London, UK

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