The economic consequences of Brexit

[Dr Jekyll]

youngsyr said:

UK buyers don't actually need to exchange GBP into a foreign currency to buy from foreign sellers - the foreign seller could set a price in GBP, but as their costs are in a (now stronger) local currency, they will be forced to increase their GBP sale price to maintain their profit margin in their local currency.

As you and Don4l point out, exporters benefit from a weaker GBP, BUT, the UK is a net importer so overall we suffer!

But someone obviously has to exchange the GBP for foreign currency.

[don4l]

youngsyr said:

don4l said:

youngsyr said:

don4l said:

youngsyr said:

Jockman said:

youngsyr said:

Or, to put it another way, if you want to compete with Chinese manufactured goods, you better be willing to accept Chinese living standards.

I do. I'm a small manufacturer and I'm proud to pay young people a living wage. Yes I accept its not a panacea for all ills in society.

The Chinese cannot compete with my prices. Currency devaluation has made them even less competitive apparently.

Yours must be a very rare exception. What do you manufacture?

Jockman isn't a rare exception.

Every single UK manufacturer who has foreign competition has become more competitive as a result of the drop in value of the pound.

Mind you, I doubt that Jockman ever had serious foreign competition. Coffins are big and heavy, therefore they would be bloody expensive to ship around the world.

That's another brilliantly one sided view of things.

Back in the real world, the fact that unless we're producing the raw materials for our manufacturing in the UK (exceedingly unlikely in many instances), the manufacturing company's primary production costs (materials) and their transport have also increased at the exact same rate that their sale prices have fallen by on the international market.

Dear God!

Let's take your example to the extreme. This will be the absolutely worst case for the UK based company.

We will simply import and export the same item at tweo different exchange rates.

Exchange rate £1.00 = $1.50.

I buy $150.00 worth of goods from Taiwan. This costs me £100.00.

I make 40% gross margin when I sell them to a country in the Middle East, so I sell them for £166.00, or $250.00.

Now, let's assume that the Pound has fallen to parity with the dollar. £1.00 = $1.00.

The goods have now gone up from £100.00 to £150.00.

If I sell them at the same price, $250 (£250) I make an extra £34.00. Or I could aim to make the same profit and sell the goods for $216.00. I have become more competitive.

I understand this because it is what I do for a living.

youngsyr said:

On top of that, Sterling has been extremely volatile in the past 12 months, primarily due to the the Brexit decision, meaning that any foreign buyer looking to place an order cannot be sure how much their order in GBP is actually going to cost them when it comes time to pay, this lowers confidence as well as increases costs.

Most companies who trade internationally fix their exchange rates once or twice a year. It is a doddle and costs sod all.

youngsyr said:

Add to the mix that the actual trade terms between the countries and the potential for changes in tarrifs are now up for renegotiation and you pile uncertainty on uncertainty.

Saying that a drop in Sterling is unilaterally positive for the UK is spinning of the highest order.

Feel free to quot/highlight where I said that a drop in Sterling is unilaterally positive for the UK. You cannot - because I didn't say it. You just made that up.

Yet another one sided post - in your example, all your costs and revenue are in USD, so the GBP:USD exchange rate is actually irrelevant to the business: your profit is unchanged at USD100 before and after the exchange rate movement.

It only becomes relevant if the business needs to make payments in GBP, where you will obviously benefit from the weaker GBP.

However, the UK is a net importer, so there are more people whose income is in GBP, but importing foreign goods than there are Brits earning their income in USD and paying their costs in GBP.

So, "Dear God" indeed! Congratulations on identifying the minority that benefits from weaker GBP, but unfortunately it's just another example of your spin.

Do you also really need me to point out that you can imply a point of view without spelling it out word for word? Perhaps you should move out of business and get into politics, I suspect UKIP could use your "skills"!

Edited by youngsyr on Saturday 27th August 17:05

I think that you should read my post again.

This time try to understand it.

I chose a scenario that was most likely to back up your position.

[don4l]

youngsyr said:

don4l said:

You do know that there are people on here that trade internationally, don't you?

You and youngsyr clearly do not understand international business. Why on Earth would you want to go on a public forum and act like an expert in a subject that you obviously know nothing about?

Have you considered that because we aren't focussed on any one particular business, we can see how other types of businesses/people may be experiencing the negative aspects of a weak currency?

The current situation may be great for your business, Jockman's and Digga's, doesn't mean it's great for the UK as a whole.

I've given you an absolutely crystal clear example of why a weak Pound is really good for British industry.

You do not seem to be able to understand it.

Give us an example of a situation where a weak Pound damages Britain.

Oh... you cannot.

I wonder why.

[anonymous-user]

If I buy ten units from Taiwan for £100 then sell them to Spain for £200 I make £100.

If the pound loses 10%

I buy nine units from Taiwan for £100 then sell them to Spain for £180 I make £80

Is this right ?

[loafer123]

Ghibli said:

If I buy ten units from Taiwan for £100 then sell them to Spain for £200 I make £100.

If the pound loses 10%

I buy nine units from Taiwan for £100 then sell them to Spain for £180 I make £80

Is this right ?

Yes, except the Spanish buy 12 units because they are cheaper for them because of the FX rate.

[anonymous-user]

loafer123 said:

Yes, except the Spanish buy 12 units because they are cheaper for them because of the FX rate.

But I am paying 10% more per unit from Taiwan.

[loafer123]

Ghibli said:

loafer123 said:

Yes, except the Spanish buy 12 units because they are cheaper for them because of the FX rate.

But I am paying 10% more per unit from Taiwan.

Indeed, but you are selling more volume.

Your assumption is that you can afford less, but in fact you do 12 units instead of 10 because it is cheaper for the end user. Yes, the margin is less, but the volume is greater and cashflow is king.

[anonymous-user]

loafer123 said:

Indeed, but you are selling more volume.

Your assumption is that you can afford less, but in fact you do 12 units instead of 10 because it is cheaper for the end user. Yes, the margin is less, but the volume is greater and cashflow is king.

That's assuming they want to buy 12

If I was selling a Uk product and not importing from Taiwan it would be different story. And I would still make 100% profit.

[loafer123]

Ghibli said:

loafer123 said:

Indeed, but you are selling more volume.

Your assumption is that you can afford less, but in fact you do 12 units instead of 10 because it is cheaper for the end user. Yes, the margin is less, but the volume is greater and cashflow is king.

That's assuming they want to buy 12

If I was selling a Uk product and not importing from Taiwan it would be different story. And I would still make 100% profit.

I can't force you to understand.

[anonymous-user]

loafer123 said:

I can't force you to understand.

No, because if I wanted to sell more I would just sell them 10% cheaper if the pound didn't fall.

[powerstroke]

Ghibli said:

loafer123 said:

Indeed, but you are selling more volume.

Your assumption is that you can afford less, but in fact you do 12 units instead of 10 because it is cheaper for the end user. Yes, the margin is less, but the volume is greater and cashflow is king.

That's assuming they want to buy 12

If I was selling a Uk product and not importing from Taiwan it would be different story. And I would still make 100% profit.

Yes and you might think , Hey we could set up and make these acme widgets ourselves instead of importing
so more jobs and a better for the balance of trade A win win...

[anonymous-user]

powerstroke said:

Yes and you might think , Hey we could set up and make these acme widgets ourselves instead of importing
so more jobs and a better for the balance of trade A win win...

I wonder why no one has thought of that before.

[anonymous-user]

don4l said:

Give us an example of a situation where a weak Pound damages Britain.

Easy, when we have to import things from abroad to sell domestically.

[powerstroke]

Ghibli said:

I wonder why no one has thought of that before.

um maybe they did !!!! now the pound is weaker you tell me would the sums be more favourable now perhaps

[anonymous-user]

powerstroke said:

um maybe they did !!!! now the pound is weaker you tell me would the sums be more favourable now perhaps

And if sterling goes back up with the boom we are getting from brexit ?

Or is the plan to devalue sterling so no one can compete.

[powerstroke]

Ghibli said:

powerstroke said:

um maybe they did !!!! now the pound is weaker you tell me would the sums be more favourable now perhaps

And if sterling goes back up with the boom we are getting from brexit ?

Or is the plan to devalue sterling so no one can compete.

Hopefully we will have some great trade deals and hence more people who want our widgets;););)

[anonymous-user]

powerstroke said:

Hopefully we will have some great trade deals and hence more people who want our widgets;););)

Hopefully, we will still need to buy their widgets to have a deal.

[ellroy]

Ghibli said:

And if sterling goes back up with the boom we are getting from brexit ?

Which boom is that?

[anonymous-user]

ellroy said:

Which boom is that?

It's in the Express most days.

[///ajd]

don4l said:

youngsyr said:

don4l said:

youngsyr said:

Jockman said:

youngsyr said:

Or, to put it another way, if you want to compete with Chinese manufactured goods, you better be willing to accept Chinese living standards.

I do. I'm a small manufacturer and I'm proud to pay young people a living wage. Yes I accept its not a panacea for all ills in society.

The Chinese cannot compete with my prices. Currency devaluation has made them even less competitive apparently.

Yours must be a very rare exception. What do you manufacture?

Jockman isn't a rare exception.

Every single UK manufacturer who has foreign competition has become more competitive as a result of the drop in value of the pound.

Mind you, I doubt that Jockman ever had serious foreign competition. Coffins are big and heavy, therefore they would be bloody expensive to ship around the world.

That's another brilliantly one sided view of things.

Back in the real world, the fact that unless we're producing the raw materials for our manufacturing in the UK (exceedingly unlikely in many instances), the manufacturing company's primary production costs (materials) and their transport have also increased at the exact same rate that their sale prices have fallen by on the international market.

Dear God!

Let's take your example to the extreme. This will be the absolutely worst case for the UK based company.

We will simply import and export the same item at tweo different exchange rates.

Exchange rate £1.00 = $1.50.

I buy $150.00 worth of goods from Taiwan. This costs me £100.00.

I make 40% gross margin when I sell them to a country in the Middle East, so I sell them for £166.00, or $250.00.

Now, let's assume that the Pound has fallen to parity with the dollar. £1.00 = $1.00.

The goods have now gone up from £100.00 to £150.00.

If I sell them at the same price, $250 (£250) I make an extra £34.00. Or I could aim to make the same profit and sell the goods for $216.00. I have become more competitive.

I understand this because it is what I do for a living.

youngsyr said:

On top of that, Sterling has been extremely volatile in the past 12 months, primarily due to the the Brexit decision, meaning that any foreign buyer looking to place an order cannot be sure how much their order in GBP is actually going to cost them when it comes time to pay, this lowers confidence as well as increases costs.

Most companies who trade internationally fix their exchange rates once or twice a year. It is a doddle and costs sod all.

youngsyr said:

Add to the mix that the actual trade terms between the countries and the potential for changes in tarrifs are now up for renegotiation and you pile uncertainty on uncertainty.

Saying that a drop in Sterling is unilaterally positive for the UK is spinning of the highest order.

Feel free to quot/highlight where I said that a drop in Sterling is unilaterally positive for the UK. You cannot - because I didn't say it. You just made that up.

So if you sell them in the UK, and the parts were £100 and you sold for 40% margin - was your UK price £166?

Now if the parts are £150, would you still sell them for £166 in the UK? Or would the UK price have shot up 50% - to £250?

I can't imagine that kind of price hike being very welcome for your UK customers.

Edited by ///ajd on Sunday 28th August 09:25