Thanks Brexit? Apple's UK iPhone price finally reaches parity with US


Apple has increased the cost of the iPhone for the first time (Source: Getty)

Forget talk of sterling Euro parity, we've already reached iPhone parity for the first time.

The new iPhone X (pronounced 10) revealed by Apple on Monday will set you back $999 in the US.

In the UK, you'll be forking out £999. 

The exchange rate is 76 pence to the dollar.

Rewind 12 months and the exchange rate was roughly the same, but the then newly launched iPhone 7 started at $649 and £599.

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So what's behind the price rise?

While it's likely a number of factors are at play, the fall of Sterling in the wake of the EU referendum has not helped.

"The additional costs will likely be attributed to distribution costs or import duties but UK buyers are probably paying a small premium. There could also be a little bit of hedging in case the pound deteriorates further as a result of Brexit," said CCS Insights analysts Ben Wood.

James Brown, director at gadget insurance firm Protect Your Bubble, said: “British consumers have slowly but surely become accustomed significant price hikes in the wake of Brexit and Apple appears to be assuming that the weak pound will only tumble further in the coming months."

But Apple did signal the pressure on its prices in 2016: It raised prices on iPads and accessories at the same time it launched the iPhone 7. At the time Apple cited "currency exchange rates, local import laws, business practices, taxes, and the cost of doing business" among the variables.

"These factors vary from region to region and over time, such that international prices are not always comparable to US suggested retail prices," it added, but analysts pointed to the sharp drop in sterling following the vote for Brexit as a spur for the decision. 

In October it then raised the price of some products by as much as £500, making it cheaper to buy a plane ticket to Canada and buy a Macbook there than in the UK with change to spare.

And in January it raised UK app store prices from 79p to 99p, parity with the US price of 99 cents.

“The challenge for Apple is that if it sells the iPhone as a lower comparative price in the UK to other markets it quickly finds that huge volumes of devices are purchased and exported undermining pricing strategies in other markets who can benefit from a weak pound," said Woods.

New prices for apps, iPhones and other devices do take into account the UK's 20 per cent rate of VAT, whereas US buyers still have to pay taxes on top, so UK buyers may not be quite as hard done by as it first appears.

The higher cost is unlikely to deter buyers, dent Apple's sales or investor's pockets, however.

“The best indication of whether a company has a strong business model or not – and whether it provides products and services that its customers truly value – is pricing power," said AJ Bell investment director at AJ Bell Russ Mould.

“If customers do truly value the products or services they will pay for them and pay the price the company wants to charge.

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“The mobile device market is very competitive and the lofty price point for the iPhone X will be a key test of customer loyalty to Apple and therefore its pricing power, which it has so far developed and maintained through a combination of branding, technological edge and the benefits of the app developer network, to the enormous benefit of its profits, dividends and therefore shareholders.”

Wood pointed to "enormous pent-up demand for the iPhone X".

"The biggest challenge for most consumers will be getting their hands on one if they really want to part with £1000," he predicts.

And Brown notes that it's not just Apple. "Samung’s Galaxy Note 8, for example, currently costs $929.99 in the States and £869 in the UK, which makes the handset around £170 more expensive for Brits," he said.

Tags: Apple Brexit