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Welcome to the new reality… it’s the Friday Blog!

Published on: 8th July 2016

Two weeks on from the historic referendum vote, the reality of what the result means for the UK toy industry – in the short term at least – is beginning to sink in. It’s impossible to assess the long-term implications, mainly due to the fact that no-one in the government currently has the faintest idea how Brexit negotiations will pan out. All we do know is that Theresa May appears to be itching for a fight, which may or may not fill you with confidence. Two years down the line, whether or not we retain access to the single European market will have significant ramifications for many UK toy businesses. But for now, it is the exchange rate which is dominating conversations across the industry: regardless of whether you’re a supplier or a retailer – or indeed whatever your role in the toy community – the plummeting pound is undoubtedly a cause for concern.

As UK-based toy manufacturing is almost as rare as someone who feels the English football team deserves a warm welcome home from the Euros, just about every toy product sold in the UK has to originally be bought in dollars or euros. With the pound already at least 12% worse off against both currencies than it was before the vote, big decisions will need to be taken. A number of retailers have already been in touch after they’ve received letters from suppliers advising of immediate price increases, and one has to assume these moves are just the start of what’s to come. Having spoken to a number of toy suppliers, most are recalculating prices as we speak, and as new ranges arrive, they are likely to be offered at higher prices. 10% seems to be a benchmark increase, although there are numerous factors that could affect the final figure either way. Of course, whether or not retailers will feel they are able to accept price increases is another matter entirely – but there is the sense amongst suppliers that doing nothing is not an option, and that if price increases are turned down, they may even have to consider declining orders. Welcome to the new reality.

As for what happens next, who can tell: I’ve read some extraordinarily pessimistic projections for where the pound may eventually end up (parity with the dollar according to some, or even worse!!), but it is only speculation. Maybe the bears have it wrong and the pound will strengthen, maybe it will level out around the $1.30 mark, or maybe we are indeed looking at $1.15 or less. Time to place your bets…

For now, communication and co-operation between buyers and sellers has never been more important. No-one wants to see sales volumes decline, but equally no-one wants to sell at a loss. A weaker pound may well have benefits for the country’s balance of payments deficit, but unfortunately the toy industry – like most consumer goods markets – is almost certainly going to see prices rise. There are those that think this may not be a bad thing; that toys represent great value and still would, even after a modest increase. And, of course, it’s often been said that the toy market is recession-proof, or at very least recession-resistant. I suspect we’re about to find out just how accurate that adage really is.

I had hoped to have been able to bring you further news about the Toy Store’s future plans for the UK market by now, but it’s all gone rather quiet on that front at the moment. Indeed, I’m hearing that some suppliers have already transferred fixtures to other retailers, while I understand that Chris Ashton will be leaving the business in a few weeks’ time after tidying a few loose ends up. With his considerable toy buying experience, I would envisage he’ll find a new opportunity soon.

Finally, congratulations to all those who took place in last week’s Toy Trust Big Challenge, raising a fantastic £200,000 in the process. A splendid effort by all involved – whether you jumped out of a plane, swam, cycled, ran or walked slightly further than you initially planned (think of it as going the extra mile – literally – for a good cause), well done one and all.