Brexit: A look at the implications for the Retail industry
2016-07-07 | by Smollan
In a historic referendum on Thursday June 23, the people of Britain voted in favour of a British exit from the European Union. The global economy has received the decision with great trepidation, succeeding existing concerns around muted economic growth forecast for 2016. With this unexpected turn of events it is key for retailers and Consumer goods companies to anticipate and plan for what impact Brexit may have on the consumer and the retail industry as a result.
With speculation of an impending recession, higher interest rates and looming employment instability, the cascading effect on consumer confidence is certain to be significant, especially in the UK and the EU. The Economist Intelligence Unit expects UK retail to contract by 3% in real terms in 2017. In the EU, Consumer spend and Retail sales are expected to shrink by more than 18% following Brexit. Consumers will be more wary of spending and as a result, the retail industry – a key player in the economy, is likely to suffer significantly as well.
The depreciating pound will benefit local suppliers as the expected barriers to entry will reduce competition amongst foreign suppliers. The discount retailers are most likely to benefit from consumers conservative spending habits. Subsequently the specialist retailers and hypermarket stores with non-essential categories, such as the property related categories i.e. DIY, furniture and household electricals, could take a sizeable hit during this unpredictable time.
For retailers and FMCG, open borders are generally an advantage therefore the preferred outcome would be that the UK maintain free trade with the EU even after its Brexit. There is however a likelihood that this may not be the case and consequently businesses have begun preparing contingencies for these eventualities. Whatever the case may be retailers and FMCG will spend the next two years preparing for all possible scenarios.