The impact of the Brexit vote has left many UK retailers in a state of uncertainty. Until the details of the UK’s withdrawal from the EU are known and legislation changed, this will not diminish. This high degree of uncertainty is impacting upon the retail industry that makes much of forward forecasting and purchasing.
Exchange rates hit
The Brexit vote has already impacted upon retailers; the UK£/US$ exchange rate immediately affected retailers who were purchasing goods in US$ unless they had fixed-rate deals in place. Where purchases have been discussed but not placed yet, these orders may now be amended due to the fluctuation in exchange rates.
But there is also a positive side to this; the Chinese are happy with the fall in the value of UK£ against their Yuan which has resulted in a rush of foreign tourists flocking to the high streets. UK product manufacturers selling overseas will also become more attractive hence exports should be on the up.
What about the workforce?
The UK retail workforce is also going to be affected until it is clear whether or not EU citizens working here will be given leave to remain. As long as the UK imposes limits on the movement of people, changes in the workforce are bound to happen. If the UK cannot provide sufficient labour to fill retail jobs then competition will increase, putting pressure on wages and retail margins. Many retailers may find their staff anxious, particularly if they are EU citizens concerned about whether or not they will be able to remain.
Goodbye single digital market
Withdrawal from the EU may also result in the UK pulling back from its dream of a ‘single digital market’. This will go a long way toward levelling the playing field with regard to e-commerce and eradicating boundaries relating to online shopping. Initiatives such as banning geo-blocking and improvement of consumer protection processes that will boost confidence and transparency with regard to cross-border logistic costs will all help. If the UK does leave the single market then many of these initiatives will be lost.
Even though e-commerce trading in the USA appears to take place cross-border without problems, there will still be an impact with regard to consumer confidence which will show up as a cost of sales. UK retailers will most probably have to monitor developments and then put in place processes in line with the digital single market. This could then be promoted as a positive marketing strategy, encouraging visitors from the EU online.
A return to old times & HS codes for products crossing into the EU?
Brexit also poses the threat of potentially leaving the single market and returning to aged processes of imposed cross-border tariffs and tightened controls when it comes to importing and exporting goods. This means increased requirements for accurate HS Code classification with delays at the borders manifesting themselves as lost sales and reduces margins. Retailers therefore need to work with trade associations, demanding that they be proactive when it comes to monitoring negotiations with regard to this issue with a view towards minimizing any potentially negative impacts.