After Brexit, Tea Prices Increase by 50 Percent

Posted in Google Brexit News
at 2016.11.01
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After Brexit, Tea Prices Increase by 50 Percent

Just when the United Kingdom thought things couldn’t get worse after this summer’s European Union referendum, it turns out that post-Brexit tea prices have risen by 50 percent since June as London grapples with the makings of a potential economic crisis. Somnath Saha, the UK head of tea giant Typhoo Tea, announced that the cost of importing tea leaves rose by half since this summer, due directly to the UK decision to leave the EU and the ensuing instability it has inflicted on the value of the country’s currency, the pound sterling. Looks like a Brexit tea time is going to come at a serious price.

Typhoo Tea, which sells all but five percent of its overall product in the UK, is reeling from Brexit. The decision to leave the EU has led to increased economic instability in the country, meaning that its typically robust currency, valued at anywhere from 1.6 to two times the value of the U.S. dollar, saw its value drop to $1.25—the lowest point since 1985. Saha said that currency issues have been “an absolute disaster for a company the size of ours,” and that post-Brexit tea prices have had “a very negative impact on our business.” Ultimately, Saha said that the situation has “now come to a point where it’s not sustainable for us” to continue operations. 

But if the actual UK exit from the EU isn’t going to happen anytime soon, why are tea prices increasing already? As a commodity, tea is traded in US dollars. So as the value of the dollar and pound sterling begin to come closer together, UK purchasing power begins to drop. And this means that the pound sterling doesn’t go as far as it used to, putting increased pressure on manufacturers to invest more money in purchasing raw material. Ultimately, this dips into a company’s profit, meaning that they need to make up the balance somewhere. And that somewhere is right inside your wallet. 

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