Economic Suicide (short term I hope)

So here we are, two and a bit weeks past the EU referendum. Since then as EDM Models I haven’t done a newsletter and haven’t said much publicly about the result but I feel the need to say something about it from the point of a business in an optional leisure sector.

Firstly, I think we need to get this bit out of the way, yes, I voted to remain. However, the thing that I need to make clear is that it wasn’t because I thought the present arrangement was perfect or that I don’t think our relationship with the EU needs to change but that I was, and remain, convinced that the option to leave offered way too many unknowns all talked down by rhetoric and damned lies. The other side weren’t much better but didn’t drive round in a bloody great red bus with a lie painted on the side.

Secondly, in the long run (very long run), it may well be the best thing we ever did but a) I am not sure I will live to see that and b) I am not sure mine and many other small businesses will ever see the benefit.

Right with the generalities out of the way let’s talk some specifics as they apply so far to my model business.

  • Immediate:  People have stopped spending!  Understandable really as everyone is now worried about the future and the first thing you do is reign in expenditure. Survivable, I hope so, but toy trains, even specialist narrow gauge toy trains, are a luxury. However, they are my livelihood so if people stop spending and continue to do so I don’t have a business.

2016-07-07_12-19-05

 

  • Very Soon:  Models are going to get more expensive. This is down to the immediate plummet of the pound against the US dollar and that some items are out of stock now and need replacing. I did some examples of now and next delivery pricing when the rate hadn’t yet reached its record low

Price Comparison

  • Longer Term: Models are going to get even more expensive. They were already headed that way with costs rising in China but they’ve just gone up again because of the exchange rate, shipping costs will rise as fuel costs go up. Yet to come are any impacts from trade deals or the lack of them – that bit is crystal ball territory but it’s not often (if ever) prices fall.

One YearThe unpredictability is the real killer. In recent years whilst the exchange rates have always fluctuated they do so in slow increments and over a long time which allows a business to plan and take them into account and allows them to forecast a price in GBP that they can stick to. Sure, the graph for one year shows ups and downs and a steady decline but it has an element of long term predictability over the short term ups and downs.

Already in the two weeks that have elapsed so far as well as my own observations of what its going to do to prices there have been two communications from UK suppliers of products made in Europe (paid for in Euro’s) and China (USD). The former sell currently available products so that was an immediate price increase. To some extent that is at least manageable because it says the price is X, take it or leave it and a trader can pass that message on. The second was an immediate small increase on some imminent items and a “we reserve the right to, but will try not to, pass on cost increases due to currency fluctuations as a `currency escalator’ adjustment”. Here we are talking reservations for production due over the next year to 18 months. Hard to see what else they can do, they’re basically saying “we haven’t a clue what its going to cost” which is a hard sell to pass on to a retail customer, “dear customer, please commit to buying this fifteen hundred quid locomotive due next year but, sorry, we haven’t actually got a clue what its going to cost!”

I have seen many `experts’ (and what do they know) saying small businesses need to have a plan so here is mine: –

Plan

What is it going to take to fix it? Well there are all sorts of things yet to be resolved such as our relationships, business and otherwise, with other countries. None of that is going to be fixed real soon but the exchange rate reacts quickly to major world status changes. The current plummet results from the UK saying `stop the world we want to get off’ so another world sized change may be needed to get it to swing the other way. I’ll just leave this image here………….Trump

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