Retail

Brexit And The Retail Conundrum

The voting has begun as of this writing and the world holds its breath, peering at lines queuing up to finally give the yay or nay for Brexit.

It’s hard to suss out what will actually happen, but a few things seem more likely than not should the status quo not be the answer and should the vote actually be an affirmative one to leave the EU. For one thing, global stock and other markets will certainly shudder, and shudder for a while.

What are the implications to the retail sector? That depends much on the strength or lack thereof of the British pound. Some analysts have said that the pound could ink drastically in the wake of a Brexit that becomes reality. That would have strong impact on prices at home, and also import prices. Imports would become quite a bit more expensive, for everything from foodstuffs to luxury goods and the buying power of the U.K. consumer and the firms that serve them would be hobbled.

Other macro concerns would include tariffs that would be levied against the country – but looming even larger is the impact to jobs, which of course means access to salaries which of course mean access to funds to buy things from retailers.

The “don’t leave” side of the Brexit argument argues that membership in the EU helps stabilize the U.K. job market at home because it gives firms – and retailers peddling their goods in brick-and-mortar shops and via the web – access to a market of more than 500 million consumers.

Setting up a wall of regulations and tariffs and even visa laws means that the flow of those transactions would be truncated, and so would the flow of workers that typically have given Britain leeway in satisfying its staffing needs. And staffing needs to go hand-in-hand with expansion plans, working both on each other in a virtuous circle.  Having access to a cost-effective pool of skilled and unskilled labor means you can expand your reach; expanding your reach means you need access to a cost-effective pool of skilled and unskilled labor. Both would conceivably, for retailers, be short circuited in a Brexit. If labor is less economical, and costs more, then profits suffer.

In short, it’s a sticky wicket for British retailers, and the firms that sell into Britain too, with global impact.  The votes cast today, thumbs up or down, will just cement that notion that no isle is an island, entire of itself. 

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