On the 23rd June 2016 the UK made history, and shocked both those in the ‘leave’ and ‘remain’ camps, by voting to exit the EU. The immediate aftermath was the resignation of a Prime Minister and a void echoing thoughts far and wide of “what next…?”
Share prices quickly tumbled and sterling fell through the floor, then shares rallied back to pre-Brexit levels while sterling’s trajectory continued to a 31yr low against the US dollar. Uncertainty prevailed; will we get trade deals, won’t we get trade deals, who are Britain’s global partners and is our relationship with Uncle Sam really that ‘special’?
The impact on retail
So we wait, both as retailers and consumers, with a new government paving the way forward for Britain with financial uncertainly and long term policy vision cloudy at best. But we haven’t stopped living, working, bettering the lives of our families and each other. Civilisation hasn’t ceased and Britain keeps on buying; underpinned by higher wages, low inflation and record low interest rates,
- UK retail sales in August were up 6.2% year on year
- Property purchases >109,000 in September, like for like to previous years
- GDP rose by 0.7% in the 3 months up to June (vs 0.6% forecast)
- UK services sector grew 0.4% in July post Brexit
That said, large and medium industry has been affected, with high profile brands such as John Lewis and Next recording substantial half year profit declines, and on the high street there have been more vacant shop premises than new store openings. The short term impact is very visible, and businesses highly exposed to currency fluctuations, bricks and mortar players and sellers of ‘high ticket’ or ‘wants’ based products (rather than ‘needs’ based) are on the rollercoaster.
What to expect
Although economic uncertainty abounds, we have not had the post-Brexit retail crash predicted; the reality is that not much has changed day-to-day. Experience of the client websites managed by Summit show that online traffic remains consistent (if not up), sales and revenue remain comparable to pre-Brexit and conversion rates stay strong. With UK consumer confidence rising and sterling levels not materially impacting retail customer behaviour, the full effect of Brexit on retail is yet to be realised.
UK Prime Minister Theresa May is still hoping to involve Article 50 of the Lisbon Treaty before the end of March 2017, despite objections from members of both of the major political parties. Assuming the process will begin in March, this gives a better timescale to the uncertainty and could further fuel the short term retail strategies that economic insecurity assures.
Ultimately the long term impact on retailing of Brexit is unknown, but customer confidence is up and purchase behaviour is largely unaffected thus far. The real impact of Brexit on retail will be clearer in the new fiscal year 2017, when the ‘exit’ in Brexit becomes a reality.