Iain Begg is a Professorial Research Fellow at the European Institute at the London School of Economics and Senior Fellow on the ESRC’s UK in a Changing Europe initiative.
As Lysander put it in A Midsummer Night’s Dream, ‘the course of true love never did run smooth’. Now it also has to contend with the consequences of the Brexit vote. The fall in the pound since the referendum means that any commodities for which there is a world price, often denominated in dollars, suddenly became more expensive. This applies to oil and many other raw materials, but also to those two essential ingredients of the engagement ring: gold and diamonds. As explored in a recent edition of BBC Radio 4’s You and Yours, many jewellers have increased their prices, arguing that because they have to pay more for their materials, they have no option but to pass the increase on to customers.
However, those becoming betrothed are entitled to ask whether this is justified. The cost of a ring is a combination of the raw materials, the work that goes into crafting them into the finished product and the retailer’s margin. For any ring made in the UK, only the raw materials are affected by the lower pound, yet vendors will often try to argue that, because the diamond or the gold is now 10 or 15 per cent more expensive, the price to the consumer also has to rise by this amount. Certainly, if the pricing practice is always to mark-up by a fixed proportion, for example by charging double the cost of the raw materials, the outcome will be to extra cash profit for the retailer, even if the margin stays the same.
To bump up the price to this extent is, let’s be blunt, simply unfair to customers. As we saw with the attempt by Unilever to justify an increase in the price of Marmite because of the fall in the pound despite the materials to make it being ‘made in Britain’, consumers can fight back. Anyone contemplating becoming engaged would be well advised to ask their jeweller what they would charge to make a ring if the customer provided the materials, because there is no convincing reason for that charge to have increased.
It is not just engagement rings. With Christmas approaching, British consumers buying all sorts of luxury items subject to world prices will have to face the uncomfortable reality that designer bags, fragrances and many other such goods will become more expensive if the fall in the pound is sustained. That is what inflation means.
Some jewellers, especially the large chains, will have bought their materials in advance and will be able to absorb the effects of the lower pound for a while. But this cannot last much longer as the old stocks are depleted and new more expensive ones have to be bought. Maybe now’s the time to pop the question and perhaps another old saying needs to be recalled: ‘marry in haste, repent at leisure’.