Last Friday, a jar of yeast extract was put on web trading platform eBay with a price tag of £100,000.
The seller was clearly counting on finding a buyer that truly loved Marmite, as the jar was already opened – although postage and packaging was generously thrown in for free.
The prank was sparked after Tesco pulled the item – as well as several other well known household brands such as Pot Noodle and Persil – from sale on its website. The move was a protest against the products’ maker, Unilever, after the British-Dutch consumer goods giant told supermarkets it had to raise its prices.
Within the day the two firms had patched up their differences and the UK’s supply of salty toast spread were secure.
But the underlying problem – the 18% collapse in the value of the pound – persists.
There are two sides to the coin of currency collapse.
On one, exporters benefit from their wares suddenly looking like bargains. Governments bloated with debt (such as ours) may also enjoy the feeling of the weight coming off the balance sheet (albeit the assets shrink right along with the liabilities. Its like a woman on a successful crash diet – you might be pleased by losing inches off the waist but not so much when you loose just as much of the boobs).
The other side of the coin is risk. As Stuart Bennett, head of G10 FX strategy for Santander Corporate Banking, pointed out at a recent event in Aberdeen, the value of sterling is a measure of economic uncertainty. Its current low seems to be pricing in a rise in unemployment once Brexit really starts to bite into UK GDP. And worse, a slump in investor confidence could see a run on the currency, leading to a downward spiral that bodes no-one well.
The rise in the price of household staples has brought home the challenges the UK faces as it negotiates its break-up from Europe. And the harder Brexit comes, the faster the pound falls.
Pro-Brexiteers continue to dismiss those raising concerns for the UK’s future livelihood as doom-mongers and “bremoaners”.
But gloomy economic predictions continue to come thick and fast.
An FT report calculated Britain faces a “divorce bill” of up to £18billion as the cost of leaving the European Union, tallying shared payment liabilities that will have to be settled in Brexit negotiations. Joint financial obligations for pensions and other spending commitments would threaten to wipe out any £350million-a-week saving the UK might be making by going its own way.
Meanwhile, a study by trade credit insurer Euler Hermes said a “hard Brexit” would lead to an upswing in UK company insolvencies as highly leveraged sectors and companies are made more vulnerable to external shocks, corporate late payment and over-indebtedness amongst consumers.
If the pro-Brexiteers have anything that might counter these concerns – now would be a good time to tell us.
