Brexit and Retail in London

The UK is due to exit the European Union in just a few weeks. This is a huge and incredibly complicated event for everyone.

I am in London for the next week to attend the London Book Fair, but will also see what I can learn firsthand about how retailers are preparing for the breakup. Here are a few of the major things that will change and will affect retailers in the city. 

Labor

EU member nations allow free and easy travel for work or any other reason between member countries. A lot of the hourly positions in London and the UK are held by people from other Euro-currency countries. And many hourly jobs are retail sales associates, stock people, etc. Young people from Poland, Portugal, Italy and elsewhere travel to London easily and work there staffing stores and shops. Going forward, this easy flow across borders won’t be so easy, although the exact details of how it will work are still unknown. Visas may be required. Different sorts of work permits, qualifications and quotas may be necessary, and so on. 

Merchandise

All kinds of goods are designed in one place, produced in another and then shipped to the ultimate retailer in yet another location. If that retailer is in London, there may be taxes and duties placed on goods that weren’t there before. This is true of everything: hammers and hardware supplies, medications, office supplies, food, and of course apparel and fashion. All of these things are likely to be more expensive and/or harder to come by. 

Supply Chain

Product has to move between where it is produced and where it is ultimately sold. And move fast. That enables retailers to provide “just in time” product assortments and thus drive inventory turn (The Second Law of Retail). When the UK is not part of the European customs union, everything must be stopped at the border and inspected and taxes applied. This will slow things down and initially may even stop transportation of goods.

Food retailers will likely be the first to be affected. Food inventory turns very quickly. The UK depends on Sicily for its tomatoes, cucumbers and other produce. Oranges, lemons and other fruits come from Spain. There is a very real risk of there being empty shelves in many retailers but especially grocery stores. 

Customers

The UK will experience an overall business downturn immediately following the actual Brexit . . . maybe even a full-fledged recession. That means the customers will have less money to spend. It may also mean that there will be fewer tourists in the capital. February sales are already reported as down year over year. 

Overall

Uncertainty is bad for business, and right now, everything surrounding Brexit is uncertain. Retailing can be a fragile business, and any combination of the above factors can precipitate a downturn. On the other hand, the retailing industry is also incredibly resilient and responds quickly to challenges. Over the next week, I will be talking personally to retailers on High Street and throughout the city. I’ll share with you what I learn—what their anxieties are, and how they are planning for this very disruptive event that is sure to come.

You can pre-order a copy of The Five Laws of Retail at Amazon or Barnes & Noble.