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Brexit hits home in the IT Industry

Lee Evans
Lee Evans23.11.2016

Microsoft Price increases from 2017

At the end of October, Microsoft announced wide-scale price increases being made to its UK pricing structure from January 2017.

Whilst the specific details on how or when the changes will impact individual customers on the various different purchasing and licensing schemes available to businesses are yet to be released, what is now clear is that with only few exceptions the increases will follow the broad headline figures below:

  • 13% increases on traditional "on premise" software - Windows Servers, Exchange email and SQL database software for example
  • 22% increase on Microsoft's business cloud services - including Microsoft Office 365 and Azure in particular

Microsoft's increases are said to "realign" UK based pricing with the Euro -

It's hard to argue with the maths when you look at the Euro/GBP exchange rates - which in the last few weeks bottomed out at a 22% low from just 1 year before.

euro-gbp-nov16.png

Whilst the maths stacks up - it's hard to ignore the pinch that will be felt by UK businesses.

Following a trend?

Microsoft's announcement follows similar moves from others in the IT sector - which is still predominantely driven by US corporations - who have been increasing their prices following a similar drop of GBP against the US Dollar, which at a recent low point stood 20% down over a similar period.

usd-gbp-nov16.png

From Dell, we have seen increases in some of our most popular desktops and laptops of 15% or more since this time last year. The trend looks set to continue as prices continue to trickle upwards each week.

Apple recently hit the headlines with price increases of their own - with an overnight hike of 20% - £500 - for example on their top of the range Mac Pro desktop.

"Apple has to recalibrate prices after significant currency fluctuations, and since the EU referendum, UK prices are out of sync with the dollar," said Patrick O'Brien, analyst at the Verdict Retail consultancy.

"Apple has taken the hit up until now. While price increases won't look good to the consumer, it's difficult to blame Apple. Once you strip out UK sales tax (VAT) and the currency conversion, the new UK prices could still be viewed as fair."

Outside of the IT Industry

If you've been paying any attention to the news recently, you'll almost certainly remember October's dispute between Tesco and Unliver over the price of Marmite which nearly saw the product cut from Tesco's shelves.

Whilst they "settled" the dispute, at least temporarily, just a few weeks later Morrisons put Marmite up by 12.5% -

Morrisons Marmite price increase

Sainsbury's former CEO, Justin King, has been quoted just today as saying that supermarket shoppers will be hit by price rises of at least 5 per cent over the next year -

Supermarket price rises expected - Sainsbury's CEO

Summary

We promised ourselves we would keep politics off our Blog, so we're not going to explore the rights or wrongs of Brexit here - 

Whilst the economic cataclysm that some predicted if the public voted for Brexit may not have materialised, it is clear within our own industry, in conversations with our customers and suppliers and on a wider basis  on headlinge consumer pricing metrics that the weak pound will have a direct impact on consumers and business over the next 12 months and beyond.

Of course, the weak pound is not all bad - UK exports are expected to rise as our products and services become more competitive abroad.

We'd love to hear your own experiences and how the falling pound or Brexit in general is impacting your business?