The FT looks at the possible implications for British consumers following last week’s Leave vote on matters such as mobile phones, travel, petrol and energy costs.
Telecoms: ‘roam-like-at-home’ rules could disappear
Mobile users could be made to pay higher costs for making calls on the continent than their European counterparts, as separating from the EU could mean new rules to wipe out roaming costs would no longer apply to UK consumers.
An agreement to force telecoms groups to abolish the cost of mobile roaming was a key victory for Brussels regulators overseeing the communications market. By June 2017 consumers across the EU will pay the same price to use their mobile devices in other member states as they do at home.
However, UK mobile groups will no longer need to abide with the ruling. The exact impact will not be known until the terms of Britain’s exit from the EU are worked out.
Roaming rates also depend on a complicated web of agreements with other operators, and mobile groups could yet decide to avoid any customer backlash by matching the efforts of European rivals.
Analysts at Ovum said that UK consumers could lose the benefits but added that the UK may continue to be part of the European Economic Area (EEA), as in the case of other countries such as Norway.
British consumers may also miss out on new portability rules making sure that Europeans can travel with their films, music, sports broadcasts and TV services such as Netflix if they are out of the country. These new rules are being worked on in Brussels. Dan Thomas, Paul McClean
Petrol: expect higher prices at the pumps
UK motorists will face higher petrol costs in the wake of the Brexit vote if concerns about the economic outlook lead to sterling falling faster than the oil price.
Brent crude, the dollar-priced international oil benchmark, has fallen more than 7 per cent since Thursday as selling by investors hit equities and commodities. But when looking at Brent priced in sterling over the same period, the price of crude has risen by 5 per cent.
Motorists in the UK have been enjoying lower prices as the result of oil prices roughly halving over the past two years from above $100 a barrel to less than $50.
But they have been steadily creeping higher since hitting a 13-year low below $30 in January and a continuing slide in sterling could exacerbate that effect. Unleaded gasoline averaged 109p a litre in May, according to the AA, the motorists’ organisation, up from 102p a litre in February.
With fuel duty of 57.95p per litre making up more than half the price, that dampens the effect of currency and benchmark moves on the overall price. But having been frozen for six years it is possible it could be in line for a rise in the next budget. David Sheppard
Retail: weaker pound will force stores to raise prices
The tumbling value of the pound will also affect costs on the high street, as companies that import goods from abroad pass on higher prices to consumers.
This is unlikely to happen immediately, analysts say, because most retailers put in place “hedges” for several months’ worth of their foreign exchange needs.
As those hedges expire, however, shops face a choice to either increase prices and risk losing the custom of recession-wary Brits, or accept lower margins on the items they sell.
Lord Wolfson, the Conservative peer and chief executive of Next, who was a prominent Vote Leave supporter, indicated that clothing prices could rise from next year.
“Most retailers will have covered forward the balance of this year so [the fall in sterling] will not be reflected in prices this year,” he said. “Next has covered 60 per cent of its requirement of dollars and euros for spring/summer next year and I imagine the rest of the industry will be in a similar position. So the volatility in currency markets will have no effect until the spring, maybe the summer of next year.”
Analysts said the weaker pound would be most noticeable on more expensive goods. “If we’re going to have a consumer recession, the companies that are going to be squeezed are the ones selling big-ticket items,” said Tony Shiret, an analyst at Haitong Securities.
“People are going to get much more price-sensitive about things like widescreen televisions. It won’t make so much difference if you’re selling socks and jumpers.” Paul McClean, Mark Vandevelde
Travel: groups braced for holiday booking decline
The fall in sterling means foreign currency is more expensive, and spending money will not go as far as it did last week. On Thursday, £300 would have bought you $450 — today it will get you just $395. Analysts say this will reduce demand for holidays, at least in the short term.
There is also a risk that cheap air fares may disappear. The EU’s single aviation area gives airlines freedom to fly across Europe without charge, and has enabled budget airlines such as easyJet to flourish. Yet this could be put into jeopardy unless the UK can renegotiate its access to the free aviation market.
The European Health Insurance Card (EHIC), which grants UK citizens free or reduced-cost treatment in other EU states, also faces an uncertain future. After Brexit, if the UK cannot renegotiate a new policy, it is possible that Brits abroad will face higher travel insurance premiums to pick up costs currently covered by EHIC. Paul McClean
Energy: cheaper household prices, but more uncertainty over trade deals
One rare area where consumers could potentially benefit is electricity prices, which could fall if the price of oil and gas tumbles again. That would make the UK’s heavy energy users more competitive with companies overseas and aiding consumers.
But the falling price of oil and gas had already plunged the sector into crisis in recent months, with 8,000 jobs in the North Sea Oil industry lost since 2014, according to its trade body’s own figures.
The Brexit campaign had promised to use freedom from the EU to reduce VAT on household energy bills, saving the average household about £60 a year. It could also allow the government to exit a requirement for the UK to produce about 30 per cent of our electricity from renewable sources by 2020.
But there will also be a lot more uncertainty surrounding the economy and its energy trading agreements without the EU.
It will become harder to secure loans from the European Investment Bank and the European Fund for Strategic Investment to invest in much-needed new infrastructure. The future of the new nuclear power plant at Hinkley Point could also be thrown into further doubt, raising the risk of power shortages, though its French backers EDF have denied that is the case. The UK also risks being locked out of the European internal energy market. Gill Plimmer
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