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What Brexit Really Means for Retailers

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What Brexit Really Means for Retailers

Whether we fall over the cliff-edge or not, the impending precipice of Brexit continues to cause concern with Britain’s retail sector – and rightly so.

There remain many unanswered questions as to the nature of the ensuing relationship. Yet, the upcoming decisions will prove pivotal to the long-term prospects of our nation’s high-street traders.

But what is the current state of play in the UK’s retail sector?

Foreign Exchange Volatility

Some days the pound is up; some days the pound is down, but its continued volatility demonstrates one thing – markets are unsure as to how the game will play out, and with sterling currently roughly 14-percent below its pre-Brexit value – coupled with the prospect of increased trading tariffs – retailers are coming under extreme pressure.

While a weak pound could generate increased opportunity for export, the price of imported goods and services has duly gone up; and with more immediate effect – all resulting in squeezed retailer margins.

Presciently, a recently-leaked government document has gone so far as to suggest a possible 20-percent rise in the cost of goods post-leaving the EU. Plus, retailers are struggling to pass the increased cost onto consumers for fear of losing their custom.

Reduced Consumer Confidence

Increasing inflation, alongside a decrease in the value of the pound, has reduced real income, leading to stretched household budgets. So, fewer shoppers are heading out, and retailers are bearing the brunt of a significantly reduced spend.

The BRC and KPMG recorded flat sales in 2017, while the Retail Traffic Index highlighted a decline in footfall of 4.7-percent.

GDPR: An Unfortunate Online Headwind

The struggle on the high street could be about to move online: incoming GDPR regulation will require all organisations to audit the records they hold on consumers and be sure they have consent to store it. Find out more about GDPR compliance here >

This could mean retailers must contact their entire customer database, asking consumers to opt-in to communications for a second time – at the risk of losing a significant portion of their audience.

Where online sales represent an important income stream, losing the contact channel could prove a major blow at a pivotal time. Moreover, should retailers fall foul of the updated regulation, they are liable for significant fines that could cripple their operation.

Squeezed Workforce

6-percent of the retail workforce are EU nationals. Until we know the Brexit outcome, many warehouses and distribution centres across the UK face the prospect of severe staff shortages.

Any shortfall could represent an economic disaster, as immigration policy will be crucial to the long-term viability of onshore supply chains.

Post-Brexit Opportunity

One bright light of a devalued currency lies in the export opportunity. So, retailers would do well to explore new partnerships abroad. Moreover, as EU-trading restrictions come down, there could be even more lucrative possibility in looking beyond Europe. 

KPMG suggest focusing operations online, while seeking to expand into the highest-growth, yet currently untapped, foreign markets. Whether through a wholly-owned enterprise, a joint venture or as part of a franchise operation, bringing in foreign currency from stable growth markets could be the safest – even most profitable – bet.

I am the founder of Startup Today. I am the main writer and have put in many hours of work into creating this blog. If you want to find out more about me then lets get in contact.

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