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Brexit and Big Tech: Will the price of an iPhone rise? We ask the experts

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apple store
The Apple Store on Regent Street, London

The UK has voted to leave the European Union. Markets are panicked, Westminster has gone AWOL, and Brits are left desperate for answers. Answers to questions like this…

Does Brexit mean smartphones and gadgets will cost more?

As Britain embarks on its slow, awkward drift away from the European Union, the consequences for UK smartphone users are becoming increasingly obvious. This week, Chinese phone maker OnePlus announced that we Brits can expect an imminent price hike for the OnePlus 3 smartphone – from £309 to £329 – blaming the topsy-turvy roller-coaster that is the GBP-USD exchange rate.

iphoneGlobal iPhone shipments amounted to 44 million units in the first quarter of 2016

“We've seen a downward trend for the Pound against the USD over the past few months,” explained a OnePlus spokesperson, ominously. "While we've held off action for as long as we can, the sharp drop witnessed in the currency markets following the Brexit decision has forced us to re-evaluate the OnePlus 3's pricing in the UK at a time of significant demand."

OnePlus said that it didn’t want customers to be blindsided, and that if we’re thinking of buying, it “recommends doing so sooner rather than later” – before July 11, specifically. Cynics were quick to label the statement as a marketing ploy, but OnePlus responded with the following:

"Given the effects of the unstable markets on our extremely thin margins, we're reluctantly going to have to make some small changes to our pricing structure for the [OnePlus 3]. There's still time to pick up the device at the current price of £309. We said that we'd give you as much notice as possible, and we're committed to taking the hit over the next few days and absorbing the resulting losses."

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It’s not the first time this has happened either; OnePlus previously kicked up retail costs in Europe at the start of 2015, when the Euro hit a nine-year low against the dollar. The decision was taken “reluctantly", but OnePlus cautioned: “If we sell at a loss, the simple fact is that there won’t be a OnePlus in the future”.

But wait – OnePlus is based in Shenzhen, China, a far cry from our green and pleasant land. Is the impact so stark closer to home?

‘Ugh'

“My alarm clock goes off every day at 5:30am as I commute quite a long way. On Brexit result day, I missed the train. I was just staring at my phone, lying in bed going ‘ugh’,” says Nick Muir, CEO of Wileyfox, speaking to TrustedReviews.

Wileyfox is a British smartphone manufacturer headquartered in London and founded just last year. It’s launched five handsets to date, and was named Challenger Manufacturer of the Year at this year’s Mobile News Awards. As a fresh face in the industry, it’s no surprise that Wileyfox fears a post-Brexit future.

nick muirWileyfox CEO Nick Muir is worried about Brexit

“The biggest short term challenge is the exchange rate in the UK. The longer term challenges include investment,” Muir explains. “If we were manufacturing in the UK, we’d be having serious issues right now. I really feel for anyone that is in that position. For us moving forwards, we need to make sure we’re in the best place for Wileyfox as a business.”

He adds: "We’re not finished with the ramifications of Brexit by a long way.”

Muir's concerns are echoed by Howard Saycell, CEO of Retra, the UK’s leading trade association for electrical retailers. Saycell recently outlined his expectations for what's next in an article for ERT, writing: “The fall in the value of the pound will, I believe, lead inevitably to price increases and will be a challenge for many of the [electrical] manufacturers."

“But if we are honest, some price increases may actually be a good thing for our industry," he continued. "We have all agreed for many years that we sell wonderful technology at far too low a price? Perhaps this presents us with an opportunity? There will be a bumpy ride, as the whole economy goes through this big transitionary period, but we will come through it."

Saycell added: "The big question is how long will it take? Has anybody got a crystal ball?"

Brexit: There's no app for that

The consequences of Brexit aren't limited to physical goods, however. In 2015, we spent over £15 billion in the Apple App Store – software is big business. But we could be forced to spend even more on apps this year as a result of the dodgy Pound. That's according to Nicolas Beraudo, the MD for Europe at research firm App Annie:

"The costs of apps in the app stores may change, but it's less to do with Brexit than it is to do with the Dollar - Pound exchange rate fluctuations. For example, the price of apps in Russia increased when the currency went down last year and, should the GBP fall significantly then the same increase may happen."

"If the British Pound or other currencies remain weak, then it would not be unusual for the stores to adjust the local currency equivalent for the different price tiers to reflect the new foreign exchange rate," Beraudo tells TrustedReviews.

"People have been attributing the recent fall of the GBP to Brexit, whereas in fact, as Mark Carney [the governor of the Bank of England] has explained, it has more to do with the volatile Euro and its effect on the foreign exchange rate."

End times? Not quite

It’s not all fire and brimstone, mind. Stuart Conroy, mobile expert and founder of Activ8, a UK company that prepares mobile start-ups for retail, tells us that Brexit shouldn’t have a significant impact on the price of phones, although he says that companies “who held stock in the UK” will be better off in the short-term. He also said that it’s unlikely we’ll see a hike in the price of apps any time soon:

“I don’t think so. We always tend to pay more than other countries anyway. We’ve got such heavy usage, they know it’s a market that relies on it.”

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However, Conroy says that whether prices shift or not, consumers will still be cautious about departing with significant amounts of cash: “Our experience when we had the recession was that people were actually going out and spending more on lower value items. There’s more concern for the big spends, TVs and the like.”

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So, will the iPhone cost more?

As with all economic flux, it’s hard to say for sure. Apple has raised app prices regionally in the past due to changes in exchange rate, but we’ve yet to see a post-Brexit hike. This week, we saw sterling plummet to thirty year lows, although there have been signs of a “bounce back” in recent days. Whether we’ll regain all of that lost ground is up for debate.

On Wednesday, Shaun Osborne, Chief Currency Strategist at Scotiabank, told Market Watch that the British pound could hit parity – i.e. equal value – with the US dollar by the end of the year, or early in 2017, adding: “We think investors should be prepared for the risk of [pound] weakness extending quite significantly in the next few months, while uncertainty surrounding how the UK moves forward persists.”

It comes down to this: If Apple gets fewer dollars for every pound we spend, that’s bad for business. If that issue becomes sustained, Apple – and all other businesses dealing in the UK – will have to consider if their pricing strategy for Britain stills works.

We can’t guarantee that the iPhone price will rise post-Brexit, but we can’t guarantee that it won’t either.

Apple did not respond to our request for comment. LG declined to comment. Samsung declined to comment. UK mobile retailer Clove declined to comment.

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Will the referendum result affect your spending habits? Let us know in the comments.

John Brunel

July 5, 2016, 6:05 pm

Feck Apple. All buy Android phones, clearly Better and faster

Phil

July 5, 2016, 9:07 pm

I appreciate you're a tech site so monetary policy the effects on markets thereof aren't especially your realm. The pound has been in a bear market since July 2014. Anyone who has expected the pound to go up is a madman (see: Barclays). The other factor which is a serious issue is the £600 billion in printed notes by the government / BOE. We have printed money like counterfeiters can only dream. It has devalued the pound since it's a fiat currency and announcements to try and stabilise the market of more quantitative easing has pushed the pound down further. This is an effect of long term monetary policy of this and the coalition government along with the [deleted and replaced with "lovely man"] Carney at the wheel. The pound has dropped markedly however this is as a result of our own monetary policy and you'd probably have found that in either event it would be at the same level in 1.5/two years time.

John Brunel

July 5, 2016, 10:40 pm

Nah.. buy Android phone, better faster

Michael Garry

July 6, 2016, 5:39 am

So you really think these drops are just short-term blips and it will recover to a level it would have been at anyway? Barring some miracle in EU negotiations, I have to say I disagree. Watching the UKP v SGD (where I live) and watching it lose 1% just yesterday and heading that way again today, I really, really, disagree.

styants64

July 6, 2016, 5:48 am

I have hit back against price rises closed down sky tv and BT sports all the football has been on freeview, contacted mobile provider and changed monthly contact now the 24months is up saving in all £105 a month, the Olympics start soon on free to air for two weeks.

toboev

July 6, 2016, 5:53 am

I'd have more sympathy with the view that this was not just a marketing scam by OnePlus if they couched their argument in terms of the movement of Sterling against the currency in which their costs are denominated.

Michael Garry

July 6, 2016, 6:07 am

Why? Why do you feel the need to post that? Let people buy what they like and I'm an Android phone user...

Sean Keach

July 6, 2016, 6:38 am

In their original post, they claimed that their costs are mostly in USD. Of course, it's impossible for us to know exactly how true that is.

Phil

July 6, 2016, 6:45 am

I did not say this was a short term blip. I said that the effect of the EU exit was negligible compared to our long term monetary policy which is the driver behind the pound falling.

vtraveller

July 6, 2016, 8:18 am

Given the build cost of the most expensive iPhone 6s Plus is about £200 at today's USD rate and that it sells for £789 (£657 ex VAT), it's hard to see why Apple would need to raise prices.

It's always been claimed that the UK prices are higher due to our disposable income. In other countries Apple products are a lot cheaper. When the Japanese Yen was weak the price difference was huge (hundred of pounds cheaper for iPads).

If wages aren't increasing it's hard to see why Apple wants to reduce sales volumes. If it did, you might as well up the price to £2000 and tell people it's not for them and loose market share (probably irrevocably).

Nick Collins

July 7, 2016, 11:21 pm

Wow. You're basically saying all android phones are better and faster, the vast majority of android phones are basic and cheap, only the flagship models such as the galaxy range compare. Plus this will affect all phones and markets, not just apple. We will likely see increases for the App Store and google play store along with hardware costs unless the pound strengthens, which is unlikely.

Nick Collins

July 7, 2016, 11:22 pm

*lose 😜

Michael Garry

July 11, 2016, 7:50 am

I like your idea of "negligible" when the EU exit has prompted such a massive fall in the Pounds value - that's not the long term monetary policy doing that!

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