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Stronger pound will be bad for profits, British businesses warn

UK companies have warned that the strengthening pound may cause “significant headwind” this year that could hit profi ts.

The success of the British currency is putting pressure on UK exporters, with the pound up more than 15% against the Australian dollar compared with this time last year and up 11% against the US dollar since July.

Despite Burberry last week reporting a 12% rise in like for- like sales for the three months to December 31, following bumper Christmas trading, chief executive Angela Ahrendts said challenging currency rates could affect the business this year.

Ahrendts, who is soon to leave Burberry to become senior vice president of retail and online stores at technology company apple, said: “at current levels, exchange rates will be a significant headwind in the second half and beyond and the macro environment remains uncertain.”

Burberry chief financial officer Carol Fairweather added that if the current pound/US dollar rate persists, “we think that will adjust our profit by £5m through the rest of the year”. Asos has seen its Australian business affected by the local currency weakening against the pound. Chief executive Nick Robertson said on a like-for-like basis asos products are around 15% more expensive in Australia than in the UK compared with this time last year.

The etailer’s sales outside the UK soared 35% in its full year to august 31, 2013, but in the four months to December 31 growth slowed to 19%.

Knitwear label John Smedley said it was less affected by the currency changes than other brands because its biggest currency inflow is the euro. Financial director Jeremy Hope said: “Because we wholly manufacture in Britain we don’t make exchange profi ts when the pound strengthens.”

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