Yesterday, citizens across the United Kingdom initiated what will no doubt be one of the most volatile periods in recent economic history. Though the UK always had its own currency, since 1973 it’s been a member of the post-war political experiment known as the European Union. No longer. After a months-long campaign, voters decided 52-48 in favor of what the media calls Brexit, to depart from the political-economic union and stand alone. Prime Minister David Cameron has already announced his intent to resign before the fall.
The results came as a massive surprise to politicos and financial analysts who predicted it would be close, but that the UK would ultimately remain. Since returns started coming in last night, international financial markets have taken the biggest simultaneous beating the financial crisis. The British pound, once considered one of the strongest currencies in the world, is tanking relative to other currencies, falling 10% against the dollar in the past 24 hours. This is the largest and fastest fall in over 30 years.
The UK will almost certainly fall into a recession, property values will plummet, and foreign investment will be snatched off the table. UK banks were the hardest hit, with Lloyds and Barclays down 30% at one point yesterday. They’ve pared some of those losses but are still down over 20%. And it isn’t just UK banks. Today was the worst day on record for US financial stocks since 2011, with firms losing over $130 billion in value.
We’ve spent a lot of time covering the impact of the global economy on the luxury retail market, but all of that news pales in comparison to the impact this vote will have on prospects for British and European fashion houses. The last few years have been a struggle, but there’s a good chance this cataclysmic event will push some big names over the edge.
There is one small group that might benefit though….US shoppers visiting London over the next few months. The dollar is the strongest it’s ever been against the pound in modern history, so savvy shoppers should be able to snatch up bags at an almost 10% discount from prices last week. All the effort these luxury companies have put into harmonizing prices globally is down the tubes, with the relative statuses of the dollar, pound, euro and yen completely up in the air. Until currency markets calm down, companies like Chanel, LVMH and Hermes are basically hostages to the currency traders. If they were to make a price change in the coming weeks, it could be completely invalidated in a couple of months. This means you have some time to cash in on the savings if your purse funds haven’t taken a significant hit.
We’ll continue following this news over the weekend and update you next week. In the meantime, share your thoughts on the situation in the conversation on BopTalk.
Read related articles below:
Handbags Keep Luxury Afloat
Luxury 2016: The Year of Struggle
Luxury Market Expected to Bottom Out This Year
China Woes Weigh Heavy on Luxury Market
Luxury Market Expects Weakest Year Since Lehman Crash
The Luxury Market after the Paris Attacks?
Global Price Implications on Chanel Street
Why Western Luxury Retailers Should Still Be Looking East
Updated: June 5th, 2017