The weak pound and uncertainty over the UK’s departure from the European Union are making it hard for British jewelers to plan their business activities, dealers said.
The currency has declined about 13% since Britain’s June 2016 vote to withdraw from the bloc in a process known as Brexit. That has raised costs for wholesalers and forced retailers to increase consumer prices, exhibitors warned this week at the International Jewellery London (IJL) show.
“We’re not pulling many gemstones out of the ground in the UK, and not mining a lot of precious metals, so by default we’re an international industry,” said Simon Forrester, the CEO of the UK’s National Association of Jewellers. “It’s increasingly difficult for people to make a business plan due to currency fluctuations.”
Britain has also yet to finalize the terms of its departure from the EU, which is due to go into effect on March 29. The resultant uncertainty led to UK business optimism falling to a five-month low in August, according to the Purchasing Managers’ Index, a market survey.
The industry is therefore still in the lurch about key issues such as potential trade tariffs, rules of value-added tax, and whether the UK will escape the EU’s ban on retailers charging credit-card fees.
“Uncertainty breeds conservatism,” Forrester noted. “Brexit is both a threat and an opportunity for existing business models. I’m seeing people putting off business decisions based on the lack of clarity.”
The pound’s fall means customers must spend more in sterling terms for products that previously cost less, as standard jewelry rates are in dollars, explained Dax Humberstone, director of Antwerp Diamonds, a supplier based in the northern English town of Burnley.
“We can expect an improvement if we have a positive result from Brexit which results in a stronger pound,” Humberstone added.
While Brexit has created the insecurity, the downward trend in the UK’s precious-metal market has been going on for years, pointed out Doug Henry, CEO and assay master at AnchorCert Group, which operates Assay Office Birmingham. Hallmarking at the UK’s four main metal-testing operations declined 2.6% year on year to 4.8 million items during the first seven months of 2018, according to data that Assay Office Birmingham compiles.
“There’s more choice, which is why precious metals specifically are declining,” Henry said. “High-end watch sales are still very strong, and costume-jewelry sales have improved.”
Ways to sell
UK consumer appetite for jewelry is weak as people are worried about Brexit and don’t know how much their pounds will be worth in a few months, dealers at IJL reported. Traffic at the show was mixed, reflecting the outlook, while Forevermark, De Beers’ diamond retail label, was the most notable absentee. (Neither IJL nor Forevermark had responded to Rapaport News’ requests for comment at press time.)
Fire and Ice, a brand of Canadian diamonds occupying the prominent booth that Forevermark had in previous fairs, noted strong interest for its products because it displayed relatively inexpensive items.
“If we’d come in only showing only the high-end or mid-to-high-end price points, I don’t think they’d be so open to continuing to look at our goods,” said Gail Golberg, director of sales and purchasing at Ontario-based Beverly Hills Jewellers, which owns Fire and Ice.
UK-based exhibitors recognized the need to increase exports, thereby using the weaker pound to their advantage. While Britain doesn’t have many of its own raw materials, it does have a national reputation that many countries would envy, noted Fei Liu, a Chinese-born designer based in the Midlands city of Birmingham.
“You just have to find a way [to be successful],” insisted Liu, who said he had urged his team at Fei Liu Fine Jewellery to focus on shipping overseas. “Sterling is so attractive, and everybody loves Britishness — let’s go that way. What we’re exporting is not only material — we’re exporting the British mentality.”
The British are good at “making the best out of the worst,” Fei noted. His company’s results were negative in the first quarter, but were up 7% for the eight months to August following resolute efforts to work with retailers, he said.
“In this economic downturn, the industry is working extremely hard to encourage retailers to continually be what the British are good at — innovative, cosmopolitan,” Liu observed. “Even after Brexit, I have huge confidence about the country and the people. In general, whether north or south, everybody is cautious, but we can’t be distracted by the negative feeling.”
Dealers mainly feared the idea of a “no-deal” Brexit, under which trade with the EU would likely be subject to World Trade Organization (WTO) rules. That would mean paying the same tariffs the EU charges other non-EU countries, and could result in traders having to obtain an export document — known as a Carnet — when shipping goods to the EU for short periods.
However, even that would not be the end of the world, according to Chris Sellors, owner of family-run C W Sellors Jewellers in Ashbourne, a small town 40 miles north of Birmingham in the county of Derbyshire. The key factor will still be people’s willingness to do business, he said.
“I’m old enough to remember the difference before [the UK was in] the EU,” Sellors said. “We all had to do Carnets, even to go to Ireland. The worst case is you go back to that.”
Meanwhile, the top levels of the domestic market — including tourist spending — remain robust, even if British people overall feel they have less money, traders said.
“In high-end items, when someone comes in and buys from one company, that company, for that month, is doing very well,” according to a diamond exhibitor from outside the UK who asked to remain anonymous. “You only need to make a few sales. You’re not selling sandwiches.”