Europe'S Shock: The Cost Of Further Hedging Against Sterling Is Also Soaring.

With the sterling trade weighted exchange rate falling to a record low, the cost of imported products rose from South African blueberries to Italy bathroom equipment, and the cost of further hedging against sterling is soaring.

On Wednesday, Unilever's Hellmann mayonnaise, Ben, Jerrys ice cream and Marmite sandwich sauce disappeared from Tesco's online store.

It is reported that the reason is that the depreciation of the pound has led to controversy over whether or not to raise prices.

The dilemma faced by enterprises is: or to shift the pressure of soaring costs, or to keep prices unchanged at the expense of profits.

Research firm East & Partners said that 4/5 of the UK's 1000 most valuable enterprises, plus 22% of SMEs, adopted exchange rate protection measures before the referendum.

Now, with the end of hedging, inflation in Britain may begin to rise significantly.

A 20% depreciation of the British pound may raise the import price of the UK by about 12%-13%, which may increase the CPI by 4 percentage points in 3-4 years.

Britain

CPI is expected to rise by 2.1% in 2017 and 1.3% this year.

The winner is not flanges and Paris.

Before the British consumer confidence data showed the optimism of the British in a period of time, but the impact of the European recession is coming to an end, and more than the British business, and the British financial industry.

For most multinational investment banks, London is their largest or second largest headquarters.

If economies of scale are to be reduced due to the need to shift business to Europe, the banking sector may have to further reduce London business.

With specific trading activities looking for new centres, there may be a further wave of job migration in London.

Political figures and industry executives pointed out that if the London financial industry was hit hard by Britain's departure from the EU, it would force the banking industry to move out of London.

The final winner may be in a city 3500 miles away, far beyond the European border.

"The EU does not have a central infrastructure or regulatory system that can take the place of London", especially in the EU.

Lloyds of London chairman John Nelson said in an interview.

"There is only one city in the world, that is New York."

Hedge protection expires, and British companies can only "streak naked".

Take Bathroom Origins, a bathroom retailer in Romford, England as an example. Sofia Charalambous, the owner of the company, has purchased the euro through foreign exchange forward contracts at 50 thousand pounds (61 thousand and 500 US dollars) before the British referendum, and is now exhausted.

She now has to pay the suppliers of France, Italy and Spain, while the value of sterling against the euro has shrunk by 15%.

She is therefore prepared to raise the price of the product.

"The situation is very difficult, because we do not know what will happen to the pound."

Express.

"We are totally at a loss."

Not just Bathroom Origins, but small businesses with annual sales of about 1 million were affected by the sharp drop in sterling after Europe.

Sporting goods chain Sports Direct International Plc said last week that the loss of foreign exchange hedging could reduce corporate profits by as much as 35 million after the "flash crash" of the pound.

In the year September 30th, exchange rate fluctuations caused British Airways easyJet to lose about 90 million pounds.

Peng Bo wrote that New York will become the preferred city to attract banking talents, which is better than Frankfurt or Paris.

This is because New York, the largest city in the United States, can compete with London in terms of market depth, breadth of professional knowledge, or regulatory requirements.

The European continent can win part of the financial business that is in line with local regulations, and enter the local market to occupy the advantage of the time zone. But most businesses may eventually shift to the other side of the Atlantic, because New York's financial industry has the strength of a dragon.

Xavier Rolet Rolet, chief executive of the London Stock Exchange Group, bluntly said that if the United Kingdom lost Europe, it would make London lose the ability to liquidate Euro derivatives financial pactions, and only those cities that had the ability to liquidate all 17 major currencies would be moved there.

"The biggest winners in the UK will be New York and the United States," said Morgan Stanley CEO James Gorman at a conference in Washington this month.

"You will see more businesses moving to New York."