Sterling Dollar Exchange Rate: Austerity or Opportunity for UK Tech Industry
Note: this article was written in November 2016, so some of the political aspects–such as the mention of Article 50–may be less relevant. However, the points made with regards to UK tech industry opportunity in a post-Brexit world still stand.
The Cloudhelix production crew just finished up a shoot with one of our company’s main clients, DataJARltd, a Brighton startup nestled away in the cities infamous North Lanes that’s grown to a tasty size.
The CEO, a Mr James Ridsdale,?brought up a really interesting point with regards to Brexit, business and the unexpected benefit it’s bringing his way.
DataJar sources 80–90% of its resources and materials from overseas, specifically the United States, as you might expect from a tech hardware business.
While shooting a video testimonial with James, we wrapped up by asking him how he felt Brexit had affected Datajar as a UK tech startup. His point immediately focused on the downturn of the exchange rate, with the pound hitting an all time low. He explained many of the agreements Datajar held with companies were based on an exchange rate “Quid pro quo” system.
Key economic points from 1975 to present
However, as James went on to explain, while doing financial forecasts for the coming year, he predicted seeing the pound taking a plunge down as hard as 70–80 pence against the dollar by quarter 2 of 2017. The UK currency is down more than 16% since Britain voted to leave the European Union back in June.
But Is There A Silver Lining…
James went on to tell us that this shortfall could not necessarily be as damaging, if handled correctly.
If you can balance a 20% increase in costs due to exchange rate by negotiating a supplier price cut of 10% and a customer price raise of 10% then at the very least you can break even, despite continued economic disruption and instability.
Price raises from suppliers for new and existing customers could be expected as exchange rates continue to fall. Equally, with a good business relationship and long-term partnership plans, UK-based businesses buying from the US may be able to negotiate price relaxations while things are up in the air.
On top of that, consider that US businesses may look to the UK as a potential money saver in comparison to EU states, and you may be able to turn a potential loss into a gain, as other companies now consider you as a cheaper and so more viable option. It’s amazing that actually, despite the initial fear of a falling pound, there’s some positives to be found in tech, an industry that will always have some involvement with what’s happening over the pond in the US.
Check out DataJAR Ltd here: https://www.datajar.co.uk/
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