How Brexit Went From Bad to Wurst for This London Food Vendorby
German sausage chef bought FX forwards before referendum vote
Malte Klemt now questions whether to stay in the U.K.
In the beginning, Malte Klemt made the right move in the currency market to mitigate the effect of the pound’s post-Brexit crash. But his predicament has only gotten worse in the 11 months since the vote.
Rising prices, falling profits and doubts about even staying in the U.K. are plaguing the German-born entrepreneur who turned his back on a career trading commodities for a food truck in the heart of London.
The 42-year-old shows how Brexit’s relentless pressures are permeating through the economy even for those who saw it coming. Before last summer’s referendum, Klemt, who imports sausage meat from Germany to sell from a converted Mercedes-Benz van, bought thousands of pounds worth of euros from his bank via currency forward contracts. As sterling plummeted to its lowest in more than six years against the euro, he was protected. Yet profit is still down more than 10 percent.
"I locked in the rates with my bank and so I had most of the sterling hit covered," says Klemt. "The currency forward was pretty cheap because no one seriously thought there would be a Brexit. If I put on the hedge now it would be too expensive and markets too volatile."
Last month, his supplier raised the price of the bratwurst meat by 22 percent, citing the drop in the pound. Additional tariffs imposed on imports if Britain quits the European Union without a new trading deal could put him out of business, he says.
"Brexit has been a big problem for us and has made me question whether I want to stay in the U.K.," Klemt said over beers -- British, not German -- near London’s Borough Market. "Aside from the increased costs of doing business, there is the issue of being a foreigner in a city which suddenly feels much less open than it used to."
He doesn’t disguise his frustration. Displayed prominently beneath the serving hatch of his white retro-style truck are fridge magnet letters spelling out "NO BREXIT."
Klemt opened his food truck in March 2016 after more than 20 years as a commodities trader for firms including ED&F Man Holdings Ltd. and Noble Group Ltd. Worn out from stress, sleeplessness, and the increasingly cut-throat tactics of his competitors, he wanted a quieter life.
Initially it looked like the gamble had paid off. Currywurst proved a hit with the bankers who work at Broadgate Circle in the City of London, where Klemt plied his trade at the time. For 6.50 pounds (now $8.50) they got a cardboard lunchbox filled with sliced sausage covered in spiced ketchup and curry powder, or the more traditional bratwurst in a roll, and a generous helping of fries. He hired two extra cooks to help with the lunchtime rush and started hatching plans to buy another truck.
Then on June 23, the U.K. voted for Brexit.
To offset some of the rise in import costs, Klemt recently increased the price of the lunch deal to 7.50 pounds and cut the size of the portions, but he’s concerned his customers won’t stomach further increases.
Office worker Danielle Williams, lining up for a currywurst box at Klemt’s new location in the Paddington Basin area, confirmed his concerns are well-placed.
"I try and spend as little as I can on lunch and wouldn’t pay more than 7.50 pounds really," said Williams. "It’s a nice treat once a week not to eat sandwiches at my desk."