The industry – and indeed the whole country – was this morning waking up to the news that Great Britain has voted to exit the European Union after one of the most dramatic nights in political history.
Like every other sector, the UK’s £1 billion a year catering equipment industry will today be pondering what the landmark result means for its prospects and future going forward.
The London Stock Market plunged more than 7% in the wake of the referendum result, which saw the ‘leave’ campaign secure 52% of the vote, while the value of the pound fell to its lowest rate since 1985. Oil prices have also fallen sharply in the wake of the decision, early reports said.
Currency traders described initial market reactions to the result as “more extreme” than those seen during the financial crisis in 2008, according to the BBC.
A huge volume of the imports that come into the UK catering equipment market originate from European nations, such as Italy and Germany. Many suppliers in the business of bringing equipment in will have concerns this morning following the nosedive that the pound has taken against both the dollar and the euro throughout the night. A weaker pound buys fewer foreign currencies, which effectively makes it more expensive to source products from abroad.
On the other hand, products supplied by British manufacturers could become more attractive abroad due to being cheaper to buy. Speaking to FEJ’s sister publication last month, British grill maker Synergy described this exact scenario. “If the value of the pound is lowered, it would mean we can import Synergy Grills to other countries at more competitive rates to them which could help encourage overseas business,” said managing director Gary Evans. “Perhaps exporting is the answer and that’s why TV is currently flooded with government adverts motivating businesses to export in case the ‘Brexit’ causes issues with British businesses.”
In the same article, Richard Gatward, finance director at light equipment supplier Mitchell & Cooper, said: “In the short to medium term, trade with EU members is likely to become more costly and with 10% of Mitchell & Cooper business coming from the EU, it is a subject to which we are keeping a close eye. Mitchell & Cooper tends to self-hedge to help offset the majority of our exposure, and by matching imports with exports the proportion that is not offset is very often covered using financial instruments.”
Nick Williams, managing director at Precision, also speaking last month, said that in the event of a Brexit, the impact on businesses like this would be double-edged. “Assuming the pound’s value will fall following a Brexit, our products will become more attractive to buyers. On the other hand, as many of the components we use (compressors, fans, controllers, evaporators, condensers, etc.) come from abroad, prices will increase.”
Another issue for the industry to contemplate is how EU legislation around energy efficient products, due into force next week, is dealt with. As reported by FEJ earlier this WEEK, minimum energy performance standards on certain types of commercial refrigeration equipment is scheduled to be imposed from July 1.
Question marks now hang over what will happen to that framework. While it seems certain that the government will want to promote lower energy products as part of its environmental strategy, it remains to be seen how this is enforced. Manufacturers had previously welcomed the EU legislation as a way of preventing inferior, higher energy consuming refrigeration from being sold in the UK, but the result of the referendum will now leave the industry with plenty of talking to do.
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