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First published on 13th October 2016

Banished by Brexit – the great marmite war

The polarity of the EU referendum started with its design of asking a very simple “in or out” question. Since then it has ignited debate and controversy within our towns and cities, within our communities and even within some families. The controversy continues with ongoing uncertainty about the legalities of the process and indeed what Brexit will even look like.

Prior to the referendum, our opinion had been this lack of a defined plan would lead to heightened uncertainty which is an environment in which businesses tend not to do very well. Ultimately, it may turn out to be beneficial, but there is potentially a long period during which the UK economy could go through some troubling times.

In the several weeks after the referendum result, the immediate shock to various indicators of economic health seem to have either reversed or stabilised with the UK consumer able to shrug off the uncertainty. This has surprised various experts and indeed many companies operating in the UK. Our sense was the adjustment would take some time for everyone (consumers and businesses) to appreciate and adapt to, so it may be several months and quarters before we see the real impact come through.

Today, exactly 16 weeks after the date of the referendum, the first rumbles are being felt in something that equally polarises opinion: Marmite!

I happen to love it, but I’m flabbergasted to read it may be banished from the UK’s leading supermarket shelf!

Plastered across the news today is a tussle between two UK companies, Tesco and Unilever, about who should bear the cost of Brexit. Unilever is trying to increase the cost it charges to Tesco and others by 10% for various products like Marmite, PG Tips, Persil and Magnum due to the falling value of the British Pound. Since the referendum, Sterling has fallen almost 18% versus the US Dollar and more than 15% against the Euro.

Exchange rates_Oct16

The last time there was a major adjustment to the value of Sterling was in 2007/ 2008. In March 2008, there was a spike in prices of wheat (+130%), soya (+87%) and rice (+74%) on global commodity markets that subsequently hit UK supermarket shoppers. The website www.foodsecurity.ac.uk reports at the time tinned foods registered a 15% increase, croissants went up 47%, ham was up 45% and various fruit and vegetables saw increases of around 33%.

We’re confident the tussle in the UK’s food supply chain will eventually be resolved amicably. However, with over 40% of Britain’s food being imported, it’s fairly certain we will need to part with more hard earned brass for our bread! That is, at least, in the short term. Longer term, we are excited by the beginnings of a renaissance for “Made in England” with UK industry picking up.

In the interim, I’m sprinting to Sainsbury’s!

 

 

 

 

 

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Kasim Zafar

Kasim Zafar

Kasim graduated with a BSc (Hons) in Physics from Imperial College and is a CFA charter holder, being a regular member of the CFA Institute and CFA UK. He has over 10 years of experience as a portfolio manager and senior analyst of global capital markets with analysis across multiple asset classes, constructing portfolios with varying risk/return objectives and active risk management processes.

Kasim acts as the portfolio manager for the EQ Investors Absolute Return, Cautious, Adventurous and High Octane portfolios. He also co-chairs our Fund Selection Committee.

When not immersed in work and family life, Kasim enjoys spending time in the kitchen practising his “cheffy” skills with both European and Asian cuisine, reflecting his mixed background.

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