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Retailers yet to plan for Brexit

News, 28 February 2017

LONDON: As the House of Lords debates the legislation that will shortly set the UK on a path to exiting the EU, half of the country's retailers report their sales have been affected but few are yet making plans to cope with Brexit.

According to a survey of 250 British retail decision-makers by Global-e, a provider of cross-border e-commerce solutions, one fifth (21%) of respondents had seen sales in the UK increase since last June's vote to leave, while around one third (30%) had seen sales fall.

Those retailers operating internationally have felt some benefit from a weakened pound, which has attracted online shoppers from around the world; those selling imported goods, however, have been hit by rising prices; 47% reported no impact.

But most (62%) were 'confident' or 'very confident' that they would continue to flourish internationally after exit talks start.

While the effects are already being felt, one way or another, just over two thirds (68%) of retailers surveyed admitted they had yet to start planning for the UK's departure from the European Union.

"Most are taking a wait-and-see approach, before considering whether to change course," said Nir Debbi, co-founder and CMO, at Global-e.

Half (51%) of retailers that sell internationally expected the UK's departure from the EU will make cross-border e-commerce more complex, with possible changes to VAT compliance and distance-selling regulations.

More generally, seven in ten (71%) retailers expected that consumer confidence will be impacted by Brexit. Three-fifths (63%) believe prices in UK stores will increase once the government triggers Article 50, while two-fifths (43%) expect consumers will reduce spending; only 28% predict that spending will increase.

The latest Consumer Confidence Index from researcher GfK, out today, showed a one point decline in February to -6; the index has been in negative territory since April last year, hitting a low of -12 in July in the wake of the Brexit vote.

Joe Staton, Head of Market Dynamics at GfK, observed that a backdrop of rising food and fuel prices, sterling depreciation, nominal earnings growth and a burgeoning fear of rapid inflation was hitting consumers confidence about their personal financial situations.

"Any momentum behind the post-Brexit, debt-fuelled, consumer-spending boom now appears to be softening," he said. "Mounting pressures on disposable income are starting to bite."

Data sourced from GfK, Net Imperative; additional content by Warc staff