Page 41 - February 2021

Future oF retail | Brexit

Now What For Retail?

While the UK has officially been out of the EU for over a year now, the transition
period is over and the UK have been out on their own since the start of the year.

So what does this mean to retailers, how are they coping and what impact will Brexit
have on the wider retail sector? RLI takes a closer look…

or the first time in 48 years, the UK began the delivery times extended. The scale of increase would vary
New Year outside of the European Union after from product to product, but over time customs duties
the completion of the transition period. Brexit could come down.
F officially began at 11pm London time on 31 Higher input costs: Since the UK food industry is a
December after it had formally left on 31 January 2020. large exporter to Europe, a lower exchange rate will be
Despite Brexit being on people’s minds for a long time beneficial in the short-term. However, this will also mean
now, and with everyone knowing the final date, the timing of that dollar-denominated raw materials will be that much
it was not ideal on the back of the toughest year for retail in more expensive, as will imports - and the UK is one of the
history because of the coronavirus pandemic. The beginning biggest import markets in Europe.
of Brexit simply presents a whole new set of challenges on Supply chain: Currently, products move freely across
top of all the existing ones. the border between the UK and other EU member states
However, estimates from the Centre for Retail Research and no tariffs apply. Supply chains will be affected if tariffs
suggest that by the end of the 2021, retail sales would still are imposed with possible supply chain disruptions. Much
be lower than in 2019 – but by 2022, retail sales should has been written regarding the impact this will have on
have recovered. On the other hand, the KPMG/Ipsos Retail time sensitive products and the need for greater product
Think Tank was cautiously optimistic, highlighting how pent contingency planning.
up savings and demand, improved consumer confidence, Labour costs: Although Brexit will not eliminate
and a successful vaccine rollout would all help to support migration to the UK, it is possible that finding workers from
the recovery of UK retail – especially in the second half of abroad for unskilled manual posts (such as in distribution
the year.* and logistics) may become more difficult. With EU migrants
According to an article by Marsh, the world’s leading the major source of labour for retailers, any restriction on
insurance broker and risk advisor, there are both challenges freedom of movement could result in a restricted labour
and opportunities ahead across many separate elements pool, which would in turn increase the cost of labour.
of the retail industry. These are highlighted below: Standards: The UK will not be completely free of EU
Trade: The EU is the UK’s largest market for regulation because any products sold to EU countries will
exports of food and non-alcoholic drinks. The ability to have to conform to its product standards, and general
trade unimpeded by tariffs and with the minimum of policies will have to be observed by UK companies in
administration is essential to the competitiveness of the order to avoid problems when trading with the EU.
industry. Changes to EU or other tariff arrangements While we may now officially be in Brexit, it still seems
obviously have the potential to re-shape industries and that challenges will present themselves as companies adjust
supply chains. and query the new rules and legislations in place, and I’m
Imports: A complete departure from the EU could sure we haven’t heard the end of the Brexit argument,
lead to imports from the EU being more expensive and certainly not from a retail perspective at any rate.

*Information from this article comes from ‘Retail 2021: What to expect in the year ahead’ from the Retail Gazette website
and an article entitled ‘The UK Retail and Food Industry and Life After Brexit – Where to Next? by Marsh.
41 RETAIL & LEISURE INTERNATIONAL FEBRUARY 2021