British brands and manufacturers are hunkering down in the face of currency headwinds, as the strength of the pound looks set to continue.
The pound rose against the euro and dollar to €1.41 and $1.56 after figures released on Tuesday showed the UK economy expanded by 0.7% in the three months to the end of June.
Experts predict the Bank of England will raise interest rates early next year, which will give sterling another boost.
Alex Bennett, fashion business specialist at SmartCurrencyBusiness.com, said there was a “good chance” sterling will remain strong for some time, particularly when the situation in Greece and eurozone inflationary pressures are taken into account.
While this could benefit UK importers, Bennett warned: “A strong sterling could hinder exporters, as they may need to lower prices or risk getting priced out of eurozone markets.”
Businesses Drapers spoke to this week, some of whom set their euro prices months ago, had all felt the impact of the strengthening pound. But most were determined not to make knee-jerk changes to their pricing or strategies.
Short order womenswear brand Glamorous, which is stocked across Europe, offers a standard flat rate wholesale price and absorbs any changes to its balance sheet as a result of fluctuations in the currency exchange rate.
Sales manager Sharon Fraser said: “We keep our prices the same and sometimes that benefits us. By doing an internal conversion, which is what we’ve always done, it keeps it fair. Our prices are quite low any way - we sell some dresses wholesale at £6 - so you don’t get many customers complaining.
“We’ve only done one trade show in Europe, Panorama in Berlin, and we had no complaints. There will be a few international buyers at Pure (on August 2-4 in London) so we’ll see what happens. If it gets ridiculous and we get complaints we’ll review our prices, but as it stands we haven’t.”
Keith Walker, managing director of Carlisle-based womenswear fabric manufacturer Linton Tweeds, said: “It’s been a big issue for us for a little while now. It’s become more acute and the possibility of the Bank of England putting up interest rates will strengthen it.
“When we go to Première Vision [in Paris] or to Asia, as well as looking after our existing customers we’re trying to find new ones and that’s becoming harder.
“We’re also suffering a financial drag to our balance street. We use forward contracts on a short-term basis and that tends to even things out over a season, but if the strong pound continues we will suffer an impact. We have a strong balance sheet so we can suffer it, but we wouldn’t want it to go on.”
However, some businesses have already adjusted their pricing. Robert de Keyser, distributor of occasionwear brand Tahari, buys in dollars and sells in euros. He said: “I sell a large quantity of Tahari in southern Ireland and I subsidise my prices for the Irish market. Instead of quoting pounds I’ve set up a euro ledger, and I convert one pound to €1.25 rather than €1.41.
“If the pound strengthens I will use a different conversion rate, but it will still be lower than UK prices.”
Walker pointed out that the strength of the pound against the euro was not the only currency problem he faces: “Our biggest customer, Chanel, is in France, but our biggest marketplace is in Japan. We’ve also had the weakening yen – it used to be ¥165 to the pound, now it’s ¥193. That has a double effect.”
However, he noted that changes to the exchange rate with the US, where Linton Tweeds has “a good trade”, have not been as marked.
Bennett said the pound was more likely to weaken against the dollar, as the US economy has regained ground following a slow first half of the year.