Pound down, prices up – businesses should act now for productivity gains
The fall in the value of the pound is more than just a frustration for holiday makers. As any of us taking holidays to Europe or the USA will know, the recent fall in the value of the pound against both the Euro and US Dollar is making everything more expensive.
Since May, the pound has lost over 5% of value against major world currencies as political and economic uncertainty in the UK filtered through to markets. The value of the pound matters because it affects the price of goods and services paid for in a foreign currency. A falling pound makes imports to the UK more expensive and exports from the UK less expensive and in the modern world of cross border integrated supply chains things become particularly complicated.
The World Bank estimates that imports currently account for about 30% of UK GDP, which means that if the pound does not quickly recover in value, the price of about a third of everything we buy will increase in line with any sterling devaluation. The Office for National Statistics blamed an inflation rate exceeding the 2% Bank of England target during 2016 and 2017 on the pound losing value against the Dollar and Euro in the aftermath of the EU referendum result.
Businesses in particular need to be aware of the risks of higher prices to their planned investment programmes. The need to increase productivity and take advantage of the raft of new technology becoming available involves acquiring new capital equipment, and any equipment that is either partly or wholly manufactured abroad is likely to be subject to currency related price increases.
There is therefore a strong case for businesses to quickly bring forward any planned capital investment to ensure that deals are struck before prices increase. The good news is that leasing allows such investment to take place now, even if budgets are not readily available. HMRC also allows the cost of leasing to be offset against tax with particularly generous allowances potentially available for Hire Purchase agreements.
Leasing also provides a hedge against an anticipated increase in the general rate of inflation, caused by a lower pound, given that rental payments are fixed for the duration of any lease agreement, typically five years. Rental payments will not go up even if the Bank of England raises interest rates as a response to increases in the rate of inflation.
In conclusion there are now very good reasons to invest in new technology and take full advantage of deals currently available by using leasing as the means of acquisition.
Andy is an experienced sales and finance professional with over 25 years’ experience in sales aid leasing. Andy is widely recognised as an expert in business finance and has in recent years focused his attention on developing partner sales teams develop an understanding of how businesses secure project financing. His training programme – Finance Unlocked – is a highly rated customisable course and is offered at no cost to partners.
If you’re interested in helping your sales team overcome finance-related hurdles during the selling cycle, please get in touch with Andy on 07966 114 243 or email here.