The pending split between the United Kingdom and the European Union has shattered any notion of a calm business environment, and the ripples are still moving outward from the initial disturbance. The IT industry especially will be facing the fallout of the decision, primarily because of the jurisdiction monitoring extremely sensitive data that now must deal with the changing regulations of the business hemisphere.
Regulations are bound to change in a more complex direction because of the Brexit split. Trade agreements will need to be renegotiated with jurisdiction over EU and UK company data as the major source of contention. Cloud based services may see a lift even as the investment in total IT may drop because of the uncertainty. The cloud gives individual companies and customers the ability to scale flexibly to deal with the uncertainty in the market that may cause volatile business action over the course of the next few years.
No one really knows what the negotiations between the EU and the UK will mean in terms of regulations, so there is likely to be a great deal of stalled business until things become clearer across the business spectrum. Some positive news is that both sides of the political spectrum are looking for a quick consensus and a return to stability so that business may continue as normal across the continent.
Tech Prices are Increasing Across the Board
The UK is facing rising prices for all tech products that are currently being imported into the country, including computers from United States manufacturer Dell and smart phones from OnePlus, a Chinese company. Experts believe that these price hikes are only the tip of the iceberg, as the pound hits record lows against the dollar. Recently, the pound touched a 31 year low against US currency, and the total drop has been more than 12 percent since the beginning of the Brexit controversy. The pound has also fallen against many Asian currencies at an even higher rate.
Reporters talking to Dell have confirmed that the rise in product prices in the UK is no accident. Dell implemented a 10 percent baked in increase across the board for all of its products. Representatives from Dell did try to cover their tracks by saying that they delayed the move as long as they possibly could.
In the UK, the costs of components are priced in US dollars, connecting the UK inextricably to the dollar as a metric of note. There is really no way that the UK can avoid these price hikes, according to financial experts.
Asian Companies are Circling the Wagons
Another company that imports many products into the UK from Asia, Intro 2020, is planning to raise its prices by 12 percent until the negotiations from Brexit have stabilized the country. They plan to hold the price increases on gadget bags, tripods, lenses and flashguns for at least six months. Sigma, a Japanese lens maker, plans to follow suit because of the “dramatic fall in the value of the sterling,” according to the general manager of Sigma Imaging UK, Graham Armitage. He also noted that institutional investors in the country were buying more stock, and he was unsure of whether they were shoring up prices or to increase profits due to the fall.
Future Profits Safe?
Reports indicate that although the short term activity from Asia is to circle the wagons, leaders in the S&P 500’s top companies fully expect things to stabilize. While investors sold off more than $3 billion worth of stock during the two days that followed the Brexit vote. This set a record as the largest recorded destruction of stock market wealth in history, but executives such as Gordon Stetz of McCormick and Carnival CFO David Bernstein would not affect earnings very much in the long term. Carnival especially has exposure to the British pound, with the currency accounting for a full 30 percent of exposure, but earnings are only hit by 2 percent if the value changes by 10 percent.
The consensus around the world seems to be that short term business will be affected, and companies that are exposed to the UK should protect themselves. However, no large group of companies expects the Brexit vote to substantially change the way that business is done on the continent of Europe in the long term. Cautiousness rules the day, but things will find their way into stability at some point.