Given the enormous profits made on iphones and Apple having distribution here it would make sense for them to absorb any short term costs rather than risk bad feeling with customers. It's more likely the iphone7 will just cost more because each new phone they release bumps the price a little, and the rumour is they will finally drop the 16gb option.
Current prices for 16GB entry level iPhone 6s are:
US: $649
UK: £539
GER: 745€
If I remove VAT / TAX and convert everything to USD with todays rate:
US: $649
UK: $593 (pretax 20% vat £449 BOE spot rate 1.3211
http://www.bankofengland.co.uk/boeapps/iadb/Rates.asp)
GER: $689 - (pretax 19% vat 626€ ECB rate 1.1014
https://www.ecb.europa.eu/stats/exchange/eurofxref/html/index.en.html)
How much are you willing to bet, that UK keeps being the cheapest iPhone market with such a difference?
Personally I'd expect something around 10% price hike to flagship model with iPhone 7 release.
For historical reference - pre-tax prices from Iphone 6s release, September 25, 2015 using exhange rates from that day and release price for entry level iPhone 6s 16GB:
US: $649
UK: $681 (pretax 20% vat £449 BOE spot rate 1.5174)
GER: $687 (pretax 19% vat 616€ ECB rate 1.1151 (I believe release price was 739 as I bought my 64GB model on release day at 849 and now it is 855))
I remember calculating same things before and iphone is always few tenners more in european markets than it is in US. I don't have any hope that this would change -> expect iPhone 7 to be minimum £599. If they bump base model to 32GB and hike the entry level price, UK entry level price is more like £659.
Thank brexit for this.
edit:
If US price for cheapest new iPhone stays at $649 and they keep UK pricing the way it was at iphone 6s release, expect new iPhone to be either £619 or £629...