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Brexit Concerns Weigh on UK Jewelers
Sep 6, 2018 5:02 AM
By Joshua Freedman
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RAPAPORT... 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.”
British perseverance
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.”
Image: Aha-Soft/Shutterstock
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Tags:
AnchorCert Group, Antwerp Diamonds, Ashbourne, Assay Office Birmingham, at Fei Liu Fine Jewellery, Beverly Hills Jewellers, Brexit, C W Sellors Jewellers, Carnets, Chris Sellors, De Beers, Derbyshire, Doug Henry, EU, European Union, Fei Liu, Fire and Ice, Forevermark, Gail Golberg, ijl, International Jewellery London, Ireland, Joshua Freedman, National Association of Jewellers, Pound, Purchasing Managers’ Index, Rapaport News, Simon Forrester, UK, World Trade Organization, WTO
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