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That may depend when suppliers' contracts on currency hedges come to an end. The fact is the currency is down about 20% +/- so it's only a matter of time befor

That may depend when suppliers' contracts on currency hedges come to an end. The fact is the currency is down about 20% +/- so it's only a matter of time before that starts to filter through to prices on the high street. Apple are the first to move in this sector but I don't think they'll be the last. This is why all the talk of the economy "booming" (here I quote The Daily Express's headline from, I think, this morning) infuriates me. We haven't seen that much in the way of price rises yet but, when we do, consumer spending may well take a hit, and at that point the growth may begin to look less healthy (1). (And if that happens the same goldfish-memoried newspapers will bleat about how the economy's taking a beating, as if the signs aren't already there.) (1) Or perhaps it will balance out as exports remain strong due to the weak pound. Economics is hard.

blowski 10y ago
If the currency falls by 20%, while the prices of imported goods will rise, it's unlikely that they will rise by 20%. A big part of the cost is local (e.g. internal shipping, running UK-based warehouses, tax), so remain unaffected. In other words, the fall in the value of the pound has not suddenly pushed Apple's costs up by more than £300 per laptop.
- danieldk 10y ago
  A big part of the cost is local (e.g. internal shipping, running UK-based warehouses, tax), so remain unaffected. The last time I ordered a non-base spec Mac from Apple, it was shipped directly from China. Same for Apple stuff ordered by friends/colleagues.
  - blowski 10y ago
    True, but even then, they have to pay UK taxes, someone in the UK to ship it to your door, a UK-based accounting firm for filing accounts, etc. Plus, they have UK warehouses for their UK shops, and those costs are spread across online and offline sales.
- lorenzhs 10y ago
  > A big part of the cost is local (e.g. internal shipping, running UK-based warehouses, tax), so remain unaffected. It really isn't: http://fitsmallbusiness.com/order-fulfillment-costs/ http://fitsmallbusiness.com/order-fulfillment-costs/ Also, Apple's costs (in USD) haven't increased. It's just that they get fewer dollars for a fixed amount of British pounds. To keep the USD they receive constant, they have to increase the price in GBP.
  - blowski 10y ago
    The laptop used to be £1600, so removing the sales tax, Apple UK received £1300. So Apple UK has UK costs, let's say they are 15% of the laptop so around £200 per laptop, and Apple US receives the remaining £1100. If the pound weakens against the dollar by 20%, that £1100 is now worth about £920. So if they put the price up to £1100, then the value that the UK company needs to submit to the US company is now £1300, and the high-street price should rise to around £1800 (£1300 + 15% UK costs + 20% tax). But the price has actually increased to £1900. What's more, this all assumes that Apple can maintain exactly the same profit margins with increasing prices, which they can only do when there is insufficient competition. Also, if Apple were paying UK corporate taxes, their UK costs would be higher, so the currency change would have even less impact. I'm no economist or accountant, so there's a good chance I've got something totally wrong, but on the face of it, this looks like Apple sneaking in a big price rise by abusing their dominant position. In markets where there is more competition, I expect I won't see the same kind of price rises, because the manufacturers will be forced to absorb some of the increased prices. Some price rises yes, but not 20%.
    - lorenzhs 10y ago
      I just gave you a link that shows that the costs of warehousing and shipping are much closer to £20 than £200. The cost for their retail stores may have decreased, but even then it's certainly not £200 per device.
      - blowski 10y ago
        I don't work for Apple, so I have no idea of their costs. I did however work for a medium-sized company with a similar business model (design in US, build in China, drop-ship worldwide). While they were nowhere near the size of Apple (total market cap was about $2 billion) their costs of operating in the UK were certainly a lot higher than 1% per unit - they were typically around 20%. I realise that Apple has astronomically large economies of scale, but they also do a lot of UK advertising and have a lot of physical stores. A lot of the costs for the firm I was working for were on things like customer service, wastage (as in fixing and replacing broken units), rates (UK local government tax on commercial properties), etc.
pbhjpbhj 10y ago
>consumer spending may well take a hit // As a non-economist I imagine that spending would remain similar, just it's going to buy far less. Which should mean retail layoffs. Re your footnote we seem to have a massive trade deficit, that's got to make the massive shift in the pound pretty apocalyptic for the UK economy. The news reports that say "see everything's fine post-Brexit" are terribly foreboding as they seem to be carefully gauged propaganda, and we've not even left Europe yet and as someone noted currency hedges have protected us from major price shifts so far. To me that says someone is petrified about what's going to happen when the public notice how desperately bad this all is. Whoever is pulling Theresa May's strings just needs to keep the lid on for a couple more months; I wonder it they can do it.
- toyg 10y ago
  > keep the lid on for a couple more months I'm starting to believe the lid will stay on indefinitely. The news about Nissan to me says they will drag their feet as much as they can, and all the "hard brexit" noise was simply for tabloids to build some political capital May didn't have. After the vote, I was bullish that they wouldn't actually dare break away; then all the noise about hard brexit scared me; but now I'm going back to the original idea that nothing will actually happen, we'll just keep on arguing for decades until "old brexiteers" give up or die a natural death.
crdoconnor 10y ago
>This is why all the talk of the economy "booming" (here I quote The Daily Express's headline from, I think, this morning) infuriates me. All the talk of a cataclysmic economic disaster and paternalistic sarcasm about not listening to economic "experts" (those same people blindsided by every crisis) before the vote was just as infuriating. Especially since a lot of it was in response to a panic over the potential of rising wages. Plus, those people don't seem to realize that there's basically a two tier economy in the UK. The macbook buying, riviera-holidaying, large-retirment portfolio economy in the South and then the North of the M25 economy where people have jobs and make things for export and vacation in the UK. The former has been booming for years and is suddenly infuriated. The latter has been in recession and ignored for years and will likely be seeing the majority of the upside from Brexit.
- walshemj 10y ago
  Not when the cost of food, petrol, and heating goes up they wont.
  - crdoconnor 10y ago
    Wages and employment going up will cushion that blow, as will (to a certain extent), import substitution. There are no local sources for Macbook Pros that you can shift your consumption towards but there are local sources of groceries, and a more competitive export sector will mean more jobs and higher paid jobs.
    - walshemj 10y ago
      Lol you know wages have been flat since 2008
      - crdoconnor 10y ago
        We've had a huge trade deficit too. Things are gonna change.
- bartread 10y ago

blowski 10y ago

If the currency falls by 20%, while the prices of imported goods will rise, it's unlikely that they will rise by 20%. A big part of the cost is local (e.g. internal shipping, running UK-based warehouses, tax), so remain unaffected. In other words, the fall in the value of the pound has not suddenly pushed Apple's costs up by more than £300 per laptop.

danieldk 10y ago
A big part of the cost is local (e.g. internal shipping, running UK-based warehouses, tax), so remain unaffected. The last time I ordered a non-base spec Mac from Apple, it was shipped directly from China. Same for Apple stuff ordered by friends/colleagues.
- blowski 10y ago
  True, but even then, they have to pay UK taxes, someone in the UK to ship it to your door, a UK-based accounting firm for filing accounts, etc. Plus, they have UK warehouses for their UK shops, and those costs are spread across online and offline sales.
lorenzhs 10y ago
> A big part of the cost is local (e.g. internal shipping, running UK-based warehouses, tax), so remain unaffected. It really isn't: http://fitsmallbusiness.com/order-fulfillment-costs/ http://fitsmallbusiness.com/order-fulfillment-costs/ Also, Apple's costs (in USD) haven't increased. It's just that they get fewer dollars for a fixed amount of British pounds. To keep the USD they receive constant, they have to increase the price in GBP.
- blowski 10y ago
  The laptop used to be £1600, so removing the sales tax, Apple UK received £1300. So Apple UK has UK costs, let's say they are 15% of the laptop so around £200 per laptop, and Apple US receives the remaining £1100. If the pound weakens against the dollar by 20%, that £1100 is now worth about £920. So if they put the price up to £1100, then the value that the UK company needs to submit to the US company is now £1300, and the high-street price should rise to around £1800 (£1300 + 15% UK costs + 20% tax). But the price has actually increased to £1900. What's more, this all assumes that Apple can maintain exactly the same profit margins with increasing prices, which they can only do when there is insufficient competition. Also, if Apple were paying UK corporate taxes, their UK costs would be higher, so the currency change would have even less impact. I'm no economist or accountant, so there's a good chance I've got something totally wrong, but on the face of it, this looks like Apple sneaking in a big price rise by abusing their dominant position. In markets where there is more competition, I expect I won't see the same kind of price rises, because the manufacturers will be forced to absorb some of the increased prices. Some price rises yes, but not 20%.
  - lorenzhs 10y ago
    I just gave you a link that shows that the costs of warehousing and shipping are much closer to £20 than £200. The cost for their retail stores may have decreased, but even then it's certainly not £200 per device.
    - blowski 10y ago
      I don't work for Apple, so I have no idea of their costs. I did however work for a medium-sized company with a similar business model (design in US, build in China, drop-ship worldwide). While they were nowhere near the size of Apple (total market cap was about $2 billion) their costs of operating in the UK were certainly a lot higher than 1% per unit - they were typically around 20%. I realise that Apple has astronomically large economies of scale, but they also do a lot of UK advertising and have a lot of physical stores. A lot of the costs for the firm I was working for were on things like customer service, wastage (as in fixing and replacing broken units), rates (UK local government tax on commercial properties), etc.

pbhjpbhj 10y ago

>consumer spending may well take a hit // As a non-economist I imagine that spending would remain similar, just it's going to buy far less. Which should mean retail layoffs. Re your footnote we seem to have a massive trade deficit, that's got to make the massive shift in the pound pretty apocalyptic for the UK economy. The news reports that say "see everything's fine post-Brexit" are terribly foreboding as they seem to be carefully gauged propaganda, and we've not even left Europe yet and as someone noted currency hedges have protected us from major price shifts so far. To me that says someone is petrified about what's going to happen when the public notice how desperately bad this all is. Whoever is pulling Theresa May's strings just needs to keep the lid on for a couple more months; I wonder it they can do it.

toyg 10y ago
> keep the lid on for a couple more months I'm starting to believe the lid will stay on indefinitely. The news about Nissan to me says they will drag their feet as much as they can, and all the "hard brexit" noise was simply for tabloids to build some political capital May didn't have. After the vote, I was bullish that they wouldn't actually dare break away; then all the noise about hard brexit scared me; but now I'm going back to the original idea that nothing will actually happen, we'll just keep on arguing for decades until "old brexiteers" give up or die a natural death.

crdoconnor 10y ago

>This is why all the talk of the economy "booming" (here I quote The Daily Express's headline from, I think, this morning) infuriates me. All the talk of a cataclysmic economic disaster and paternalistic sarcasm about not listening to economic "experts" (those same people blindsided by every crisis) before the vote was just as infuriating. Especially since a lot of it was in response to a panic over the potential of rising wages. Plus, those people don't seem to realize that there's basically a two tier economy in the UK. The macbook buying, riviera-holidaying, large-retirment portfolio economy in the South and then the North of the M25 economy where people have jobs and make things for export and vacation in the UK. The former has been booming for years and is suddenly infuriated. The latter has been in recession and ignored for years and will likely be seeing the majority of the upside from Brexit.

walshemj 10y ago
Not when the cost of food, petrol, and heating goes up they wont.
- crdoconnor 10y ago
  Wages and employment going up will cushion that blow, as will (to a certain extent), import substitution. There are no local sources for Macbook Pros that you can shift your consumption towards but there are local sources of groceries, and a more competitive export sector will mean more jobs and higher paid jobs.
  - walshemj 10y ago
    Lol you know wages have been flat since 2008
    - crdoconnor 10y ago
      We've had a huge trade deficit too. Things are gonna change.
bartread 10y ago