For the British there is another eventful year behind us. The negotiation talks about the withdrawal from the European Union are anything but flawless and it is clear that the British have to pay a huge bill for this. Not to mention the negative effects that the UK is already seeing from this upcoming Brexit.
Over the past few months it has become clear that many British companies are already experiencing the nasty consequences of the forthcoming separation between the United Kingdom and the European Union. As a result of all the uncertainty as to how this separation will look exactly like and how the United Kingdom must proceed on its own, the pound has had to surrender the necessary value during the past two years.
Profit margins at most British companies are under considerable pressure
The depreciation of the pound has meant that the United Kingdom has been confronted with the phenomenon of 'import inflation'. This form of inflation occurs when the purchase of goods from outside the country's own borders costs considerably more than was previously the case. Partly as a result of this import inflation, profit margins are under considerable pressure for many British companies.
On the graph above, from Bloomberg, the performance of the British supermarket giant Tesco is shown. Investors who had invested in this British company 5 years ago would be stuck with a considerable loss today. In the same period, Amazon increased in value by more than 300% (to clarify the contrast).
For the British companies, it is first of all hoped that the British themselves will become more optimistic. The UK expenditure has stagnated because of the uncertainty about the impending separation from the EU. And from this reluctance, more and more British companies are experiencing the unpleasant consequences.