Posted by Rewan Tremethick on December 21st, 2016.
Inflation in the UK is measured by the consumer price index (CPI), which uses a basket of goods comprising of the things the average household buys to measure whether prices are going up or down. With the average family spending an additional £500 over Christmas, we thought it worth checking to see if those warnings of price rises following a vote for Brexit have come true. But instead of a basket of goods, we’ve naturally got a Christmas stocking.
GBP EUR exchange rates are currently -9.5% lower than its pre referendum levels and GBP USD exchange rate’s nearly -17% lower. This makes it more expensive to import goods from overseas – whether whole products or components and ingredients.
Let’s take a look at how the exchange rate slump following the referendum has affected some classic Christmas items, from gifts to food.
What could be more Christmassey than crawling around on the floor for half an hour, trying to find a missing piece of a Lego Death Star? The world-famous bricks are a common feature of Christmas wishlists. Lego is often accused of having hiked its prices over the years, but according to Reality Prose, this is a misconception. Over the years, Lego sets have grown in size, so on a piece-by-piece basis the cost of Lego bricks has actually fallen over the years.
Although the latest stories of a price hike are true and the current weak state of Pound Sterling is to blame.
A Lego spokesperson (as in someone who works for the company, not a spokesperson made of Lego) commented;
‘As communicated to our retailers, The Lego Group will raise prices in the UK, due to currency fluctuations.’
A 5% rise is in store, which would take the aforementioned Death Star set from £399 to £419.
A Christmas tree without a very obviously bottle-shaped gift or two underneath is a sorry affair. Some people claim a bottle of wine is a bit of a cop-out present, but this year it’s more thoughtful than it was last year, thanks to a price increase.
The UK’s largest importer of premium wines Enotria & Coe warned that prices on many of its varieties would be rising as of October. According to the company, half of the wines it carries were set to increase in price by a maximum of 5%, while 15% would see prices hiked by a maximum of 7%.
But if you shop around, you should be able to easily find a good tipple at a reasonable price, with other wine merchants seemingly feeling no pressure to hike prices. As Majestic Wines Chief Executive Rowan Gormley explains, there may not be any need to suddenly hike prices;
‘My hunch is that any price increases will be gentle, and won’t be different from the increases in duty that customers are used to. Our average bottle of wine is £8, and about half of that is taxes. The wine itself costs £3 to make, so a 10 per cent fall in the currency means an extra 30p on the bottle. That’s the scale of the price change we’re looking at.’
So raising a glass this Christmas may or may not be more expensive, depending upon the kind of wine you like and how open you are to change.
Admittedly Toblerone does face stiff competition for the title of ‘most Christmassy triangle thing’, including from sources such as ‘those green triangles’ from the Quality Street tins. But a Toblerone, with its wintery mountain range-like shapes and pyramidal box, is often found under the Christmas tree.
But since the referendum, Toblerone appears to have lost its allure to many thanks to a slight redesign. Technically the bars haven’t gotten more expensive, but they are now 10% lighter, so which still means you’re getting less chocolate; a horrifying prospect for lovers of the stuff, especially in triangle form.
Those famous triangles are now much further apart, conjuring up images of toast racks or the stingers used by police to burst the tyres on runaway vehicles. Maltesers packs have also shrunk. Needless to say, the British public was not happy.
The older generations often complain that in their day all they got in their Christmas stocking was an orange. These days teenagers and adults expect Apples. Products by the global tech giant are some of the most highly sought-after gifts, with half of all the new smart devices activated in the week ending on Christmas day 2015 bearing the Apple brand.
Unlike many of the other products in this article, Apple’s post-referendum price hike wasn’t announced by the company itself. Users and journalists quickly noticed however, after the latest line of MacBook Pros were released at a significantly higher price than previous versions.
Simultaneously, pre-existing machines saw their recommend retail prices upped by around 20% in some cases, with the cheapest Apple laptop – the 13” MacBook Air – increasing in price by £100 to £949. Prices for the 12” MacBook rose by £200 to £1,249, while Apple’s most expensive model – the 15” MacBook Pro Retina – saw an increase of £300.
The top-of-the-range iPhone 7 models were £100 more than the equivalent iPhone 6 option at just under £1,000 for the handset. You may be tempted to attribute this to the extra capabilities of the iPhone 7, but Apple’s launch presentation showed that, in the US, the latest model is the same price as its predecessor was.
The humble Christmas pudding is set for quite the price rise thanks to fluctuating exchange rates since the referendum. The cost of raisins is up 3%, while butte prices have spiked 92% thanks to a fall in domestic production. Sugar has also become costlier to import, contributing to a total price hike of up to 21% for Christmas pudding.
You might not need to start Googling alternate Christmas desserts just yet, however. According to Mintec, which compiled the data, year-on-year the overall cost of Christmas dinner has increased just 1% and remains lower than 2013 or 2014.
While there have been several notable price hikes, the majority of Christmas items remain much the same price as they were, inflation aside. However, experts warn that next year could see prices rising significantly. Consumer price index growth is already above even the forecasts made after the referendum, although the Pound is a fraction higher than it was following the vote, which may help to curb inflation.
Many companies will have used financial instruments that allow them to avoid the rising costs associated with weaker exchange rates. These will expire soon, which may mean companies are forced to pass those costs onto consumers. But it’s not all doom and gloom; by Christmas 2017 exit negotiations will have begun and there’s a chance Sterling will have made some sort of recovery on indications the government will be able to secure us a good deal.
Plus, as noted above, the overall cost of Christmas dinner has barely changed. Happy Christmas!
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