The pound’s done a bungee jump in recent days, plunging because of the UK’s large current account deficit (we’re importing more than we’re exporting) and continuing uncertainty about Brexit. Step forward Marmite, unlikely symbol of the new order.
Unilever wants Tesco to pay more for items like Marmite to compensate for the fall in the value of the pound. Unilever gets a lower value pound when it sells to Tesco, so when it sells pounds to pay for raw materials priced in dollars or euros it ends up paying more pounds than before. Ah, some say, it shouldn’t matter because Marmite is made in the UK so there’s no currency conversion. But the reality is more complicated. The Marmite spread is made in the UK, but the bottle isn’t, hence the reason for the higher cost of production.
It’s symptomatic of the choppy waters that lie ahead. A falling pound makes our exports cheaper (great if you’re flogging whisky and Land Rovers) but our imports more expensive (oil, for example is priced in dollars, so expect pump prices to rise). But while the pound has bombed, the FTSE 100 has headed north. Big UK companies cover the currency risk because they trade internationally, in dollars and euros as well as pounds. Unfortunately, this isn’t the case for most companies.
Talking of Marmite, our Foreign Secretary has been spouting more Brexit misinformation in an attempt to steady the heaving ship. Don’t worry, he trumpets, the UK will get a better Brexit deal than we have now. We can have our cake and eat it i.e. we can take back control over immigration and retain access to the single market. What planet is he living on?
Donald Tusk, EU Council President, immediately squashed this ridiculous suggestion. “That was pure illusion, that one can have the EU cake and eat it too. To all who believe in it, I propose a simple experiment. Buy a cake, eat it, and see if it is still there on the plate.”
How does Boris retain a shred of credibility? He is a truly Marmite character.