U.K. Plc is losing its battle against the forces of inflation that have been bearing down since the Brexit vote in June.
As the pound plumbs record lows on a trade-weighted basis — driving up the cost of imports like South African blueberries and Italian bathroom fixtures — the cost to hedge against further currency declines is soaring. The dilemma for merchants: pass on that cost or hold the line on prices that erode profits.
Take Sofia Charalambous, who sells faucets, mirrors and soap dishes at her Romford, England-based retailer, Bathroom Origins. The 50,000 pounds ($61,500) of euros that she bought via currency forward contracts before the U.K. decided to leave the European Union have been exhausted. Now she needs to pay French, Italian and Spanish suppliers in pounds that are worth 15% less against the euro, and she's preparing to raise prices.
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