Brexit: A hammer blow for mobile manufacturers

Brexit: A hammer blow for mobile manufacturers

The plummeting pound has hit the mobile market already and many in the industry have fear it could get worse.

Any market where imports are important has been affected by Britain’s decision to leave the EU, and mobile in particular is already counting the costs. The lower value of the currency is impacting the already small margin of manufacturers in particular, which probably see prices increase on mobile products.

The UK has been one of the lowest cost mobile markets in the world. It’s something which could be set to change as big international firms look at their UK balance sheets. The largest manufacturers look to be hit the worst with sizable chunks being taken from their margin as a result of Brexit.

That said the greater flexibility these companies have when it comes to price will give them a certain buffer. For businesses where products are cheaper fluctuations in price can be far more damaging. The difference of £20 on a £450 contract sold handset might not be significant, but for a £95 SIM free phone the implications of even a £5 price rise can be huge.

Imported devices are the bedrock on which the entire mobile industry has been built. If the prices were to rise as many are anticipating the effects on the market would be sizable.

Operators would be forced to raise contract subsidies giving them even more motivation to push consumers towards SIM free deals. The costs associated with running largescale retail store operations based on selling what have been low cost imported products will come under greater scrutiny.

Many areas of the industry are already running on razor thin margins which will struggle to support these shifts. Distributors for instance will have to be consistently adjusting their valuations going forward, in anticipation of the actions of their manufacturer partners. The movement of cheaper European stock into the UK will also be affected, a consequence of which is likely to be higher costs.         

Of course the valuation of the pound will stabilise at some stage. But the ramifications of the Brexit vote will continue to impact the industry for some time.

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