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Microsoft will make adjustments to Azure pricing in British pound (22% increase)

M
icrosoft is to increase its prices by as much as 22pc in the UK because of sterling’s recent decline, a rise that is likely to affect thousands of businesses and could cost the Governments tens of millions of pounds.

The software giant is the latest big-name company to force through a post-referendum price rise, saying the move would “harmonise” its prices across Europe.

The value of sterling against the dollar, in which Microsoft books its revenues, has fallen by approximately 18pc since the EU referendum on June 23.

Microsoft’s move comes after the consumer goods giant Unilever attempted to pass on a 10pc price increase to British supermarkets, a move that to led to a stand-off with Tesco, resulting in what was dubbed “Marmitegate”, a 24-hour period during which many  Unilever products disappeared from the retailer’s online store.

Unilever’s attempt to pass on price rises to UK consumers was dubbed ‘marmite-gate’

N
estlé’s chief executive, Paul Bulcke said last week he was considering a range of options to mitigatethe fall in sterling, such as increasing prices of its products, which include Kit Kat and Nescafe, and cutting costs.

Mark Carney, Governor of the Bank of England, has said that food prices were likely to be hit by increased inflation as a result of sterling’s fall.

Costs for Microsoft enterprise customers will increase by 13pc for computer software and 22pc for so-called online cloud services, where the company hosts a customer’s data in a virtual storage centre.

Microsoft is one of the biggest sellers of business software in the UK, led by its suite of Office programs such as Word, Powerpoint and Outlook. Its cloud service, Azure, sells access to vast computing power and is used by customers including the Ministry of Defence.

The price rise, which comes into effect at the start of next year, could cost the Government tens of millions of pounds a year.

While the Cabinet Office did not comment on how much it spends on Microsoft contracts, it is believed to be at least £100m a year.

The government spends a lot of money on contracts with Microsoft

Credit:
Getty

T
he intended price rise comes at a bad time for the Government, given a major effort in Whitehall to reduce IT spending as part of a wider focus on civil service costs.

The price rise will only apply to new purchases, rather than ongoing contracts, and Microsoft said it would not increase prices for consumers.

However, the rise is likely to deal a blow to businesses, which may have to raise IT budgets or sacrifice other projects in order to pay for the increased charges.

In its accounts, Microsoft does not strip out UK revenues but they are believed to amount to billions of pounds each year.

Last week, the Seattle-based technology giant reported quarterly sales of $20.5bn (£16.8bn).

Softcat, the British IT reseller, said last week it had seen several foreign suppliers raise prices, which it had been forced to pass on to consumers.

Microsoft said what it called “harmonisation adjustments” were similar to those it made to pricing in Norway and Switzerland, after movements in the krone and Swiss franc earlier this year.

A Cabinet Office spokesman said: “We are constantly monitoring market and supplier pricing to ensure best value for our customers and the taxpayer. Where we are made aware of proposed price changes we will work closely with that supplier to identify ways to mitigate any increases in price.”

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