U.K. retailers called on the government to protect consumers from higher prices, pointing to cost pressures from the weakness of the pound and the risk of tariffs on imports from the trading bloc.
Sterling’s almost 17 percent drop since the Brexit vote is “compounding economic headwinds,” the British Retail Consortium said in an open letter to Trade Secretary Liam Fox Monday. As officials prepare for negotiations to leave the European Union, the group also said firms have little margin to absorb added costs from tariffs -- which it said could be as high as 27 percent on EU meat imports -- and from additional administration.
“We will be supporting the government through this complex and difficult process,” said BRC Chairman Richard Baker. He warned that “increased cost pressures on retailers could mean higher shop prices.”
British firms are already feeling the effects of the pound’s slide. Sports Direct International Plc was forced Friday to scrap a profit forecast it issued just a month ago after hedging losses caused by “extreme movements” in the currency. Sterling dropped the most since the June 23 referendum last week with a so-called flash crash sending it plunging more than 6 percent in just a two-minute period.
Even so, reports show consumers are proving resilient. GfK’s gauge of consumer sentiment rebounded from an initial slump last month as the outlook for the economy improved.
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