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MONEY SHOP


Footwear Today’s financial plumber, footwear retailer David Gummers, talks about the financial implications of leaving the European Union.


C


an I recommend before you read this, you go out and buy a packet of salt so you can take a few pinches of it.


Normally when I write my articles I am writing from experience, but


without a crystal ball, I can’t see into the future, so can only guess what the next five years will bring. So what advice can I offer, I believe that once the hysteria calms down and the political parties sort out their internal leadership questions, things will be less fraught.


Obviously, buying from the continent will become slightly more expensive


as the pound is certainly going to weaken. I am a little surprised that the support of the bank of England is not enough liquidity for a rise in interest rates, as this would have contained the hit on the currency. But, I understand that they do not want to fuel extra inflation.


Turning now to the impact on the retailers first – Uncertainty always has a


negative effect on trade. All we can do at the moment is keep an eye on our stock levels and ensure we buy our core lines and be very cautious on anything else. Pricing policy is going to be more critical now, as in the short term people will be more wary of spending. If customers are price resistant, I’ve advised my staff to be a little bit flexible. We have always had rules on this, but I am going to let them make sound decisions. Empowering people is always good for a business.


It has never been more important to ensure your phone tariffs and your


energy tariffs are the best you can get. On this there is a possibility that VAT may be reduced.


There is certainly going to be greater pressure on costs, as businesses


generally do not go bankrupt due to lack of profitability, but because of lack of cash flow. I have a feeling that a few multiple retailers may look hard at the non-profitable shops and down size a little. Mind you, it may well depend on their rental agreements.


Turning to manufacturers and wholesalers, the impact will depend on


from where they buy their raw materials and in which currency. If they buy in US Dollars as some do, this will make very little difference to


their pricing, provided they have a dollar bank account, as the prices will be nearly the same. If they are buying in Euros or pounds, things may be more complicated, as it looks inevitable that costs will have to rise, especially as transport costs increase.


Both manufacturers and retailers will have to reduce their margins a little


as the public are going to feel worse off, whether they are will depend on what the government do in terms of tax, benefits and pensions and whether the savings of not having to pay into the EU are used to fund public services or in some other way.


Back to manufacturing, of course, if they are an exporter and the costs of


production do not rise too much this could be a good period for them, as long as the overseas customers are happy trading with the UK - the prices to the end user will be cheaper by about 7% as this is the current devaluation of the pound. I do not think it would be a good time to say to a customer overseas we have managed to avoid a price increase!


If you would like David to look at your business costs, he promises that if he cannot save you any money you pay him nothing. But for every pound he saves you pay him, 15 pence. If you want to learn more email David on david@fdickinsonfootwear 01229 580654 Website: http://www


.fdickinsonfootwear


I believe you will still be able to maintain your margin even if you have to


cut prices. There is going to be cheap money as interest rates are not going to rise in


the short term, of course, how much a bank will lend will be dependent on the level of risk, as always! Even if they probably should,


if the pound is


going to be defended. Everyone is going to have to look closely at the costs, as while the first


half of the year saw reasonable growth, the uncertainty is going to mean people are going to be more cautious with the spending.


There can be no doubt, we are in unchartered territory. Whichever way


people voted - and bear in mind that in a group of 100 people 52 voted to leave and 48 voted to remain - we have now got to work out the best strategy to weather the change.


As I said at the start I normally write from experience and I am if anyone


reads this article in five years’ time, I am sure some of my guesses will have been correct and others will be wide of the mark, at least salt sellers will have done well!!!


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34 • FOOTWEAR TODAY


• AUGUST 2016


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