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Retail Update: United Kingdom European Union membership referendum, 2016

2 June 2016

With the EU Referendum less than a month away, there isn’t a day where Brexit fails to make the headlines. Some of the biggest names in retail entered into the debate recently outlining the potential implications for the sector and the wider economic effects of leaving the EU saying it would be ‘catastrophic’. The concern around Brexit is certainly not good for business. Consumer confidence as measured by the GfK index was down 3 points to a 15 month low and -7 points year on year in April; there was a slight improvement to -1 in May. There is a real risk of economic decline and recession if Britain leaves the EU and this referendum is too close to call. With polls neck and neck and 20% of voters undecided, it is a nervous time for the retail sector as the 23rd June approaches.

Retailers are focussed on the implications for trade, pricing, supply chain and eCommerce at a time where the sector is looking to strengthen its reach online and internationally. The UK is a leader in eCommerce and has invested heavily in technology and infrastructure to expand its customer base in the EU. Economic confidence, the value of the pound, and immigration are concerns for the country’s largest employer thus making the referendum sensitive to UK consumers who are currently enjoying a period of high disposable income and don’t want to return to the frugal days of the recent recession. Treasury analysts are predicting an EU exit would add £220 to the annual cost of food and clothing for every British family, which will alarm retail executives already fighting for every pound in a highly volatile market.

Brexit and its perceived economic implications are playing heavily on the minds of consumers and retail businesses. There is certainly a consensus that the EU is far from perfect but when it comes to voting and the opportunity for change, it is difficult to veer away from what is known when no one can accurately predict the future for the country post EU. Whilst there would almost certainly be some economic pain associated with coming out of the EU, the reality is that retailers are equally concerned with the fragility of economic growth affecting spending and will have to adapt whatever the outcome of the referendum.

Jonathan Flynn is a Consultant within the Retail practice at Odgers Interim


Categories: Retail

Comments

John Lewis at 02/06/2016 16:31 said:

I think retailers have far bigger problems than whether the UK is in or out of the EU.

The UK is "over retailed" although with BHS and Austin Reed departing the correction is underway. Those companies that do not have good ecommerce in place and are unable to effectively manage the distribution and currency risks that manufacturing overseas and exporting bring face the greatest problem. Companies in other countries and agile start-ups will use ecommerce to attack the UK market.

For a more lighthearted view and commentary on the economic forecasts see - http://wp.me/p3U0tf-80

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