WEAK POUND, HIGH INTEREST: How will it impact the taxi trade?
The pound dropped to a new historic low against the dollar after a controversial mini budget announced by the chancellor.
The value of the pound has plummeted in recent weeks due to growing economic uncertainty facing most people in the UK. The appointment of Liz Truss provided little in the way of confidence and then sterling dropped again on Friday 23 September at the announcement of Government tax cuts.
Kwasi Kwarteng’s mini-budget started a mammoth sell -off in the markets. The Bank of England has also had to act fast by trying to shift some UK Government debt and raise emergency interest rates to stabilise the economy.
What does this all mean for the taxi industry?
Let’s first look at the impact it will have with running costs and future investment. If the value of sterling drops, the more expensive it is to buy goods from overseas.
Quite frankly this will affect pretty much everything the taxi industry buys. The cost of manufacturing car and taxi parts will increase as the pound loses value. This will inevitably push up the cost of vehicles at a time when clean air zones are at the forefront of local authority policy.
Maintaining vehicles will also become more expensive as parts made abroad are bought using the fragile pound.
Fuel prices will likely now remain high at the pumps as the weak pound battles to compete on the common market. According to the AA, motorists are already forking out an extra £5 to fill up a typical family car. This may take weeks or months to filter through as retailers use up current stock first.
Looking more widely, the cost of energy and food will also likely rise again pushing up inflation. This could make less money available for luxury commodities, leisure activities... and travel.
It’s not all doom and gloom though. A weak currency will attract more overseas tourism who will get more bang for their buck. The price of holidays abroad for Brits will also feel a little bit out of touch for more people. Expect to see a rise in staycations over the next 12 months.
What will the rising interest rates do to the taxi trade?
This could have a very detrimental impact on the taxi fleet across the UK. Interest rates could rapidly rise past the 6% marker in the coming months in a bid to curb the slumping pound. Any rapid rise could make the cost of financing new vehicles out of reach or unworkable for many, especially given the weak pound will have already pushed up the unit price, causing a financial double whammy!
There are also concerns that finance simply will not be readily available to many. Mortgage lenders and banks are increasingly pulling loans from their range of products as confidence continues to waver.
The next 6-months look set to be an economic rollercoaster hot off the heels of the coronavirus pandemic. With demand still outweighing supply, the current taxi driver shortage caused by the pandemic could be the saving grace through this period.
