Small UK businesses feel the squeeze from falling sterling; German manufacturing reports industry ‘in freefall’
• “We are always behind the curve when the pound is falling, because the effect is immediate, whereas altering our prices to counteract that can only be done gradually.”
• For many small businesses in the UK, the unpredictability that Brexit has brought to the pound is starting to bite, forcing them to consider raising prices or relocating key facilities to diversify Brexit risks.
• With the increased likelihood of a no-deal Brexit after Boris Johnson took over, sterling weakened further, the slump below $1.30 and subsequently $1.25 against the dollar has wiped out profit margins for some importers from the US.
• Confidence levels among small businesses was in negative territory for an unprecedented fourth straight quarter this year, according to a body representing 165,000 companies across the UK.
• German industry conditions are in “free fall”, suggested the Ifo Institute’s manufacturing business climate index slumped to minus 4.3 in July, the lowest level in more than nine years, echoing a separated survey pointing to mounting troubles in Europe’s powerhouse economy.
• “No improvement is expected in the short term, as businesses are looking ahead to the next six months with more pessimism.”
• “Germany is in a grey area between a marked growth slowdown and a recession,” said Jörg Krämer, chief economist at Germany’s Commerzbank.
• Expectations have also grown that the ECB will need to unleash a fresh round of bond buying to shore up the bloc’s economy. Germany, in particular, has sustained a blow since its sprawling manufacturing sector has been affected both by the US-China trade skirmish and also a slowdown in global growth.