Brexit and an uncertain future

 

Challenges around the UK leaving the EU lie ahead, suggests Sean Fleming

FRUIT AND VEG pickers are in short supply this year in the UK, apparently. The reason – and it’s unlikely you need it spelled out to you – is Brexit. Or rather, the uncertainty surrounding Brexit because in the 12-plus months since the UK voted to leave the European Union, much has been said but little has been decided.

Unless you’re a hedge fund manager, uncertainty is bad for business. However, I’m betting you’re not a hedge fund manager. Although I am simultaneously betting a slightly smaller amount that you are.

The problem facing fruit and vegetable farmers is present in other labour-intensive sectors too, in varying degrees. With uncertainty over their future in the UK, many EU nationals who were living and working here have left. The exact size of this so-called ‘Brexodus’ is unknown but any disruption to the supply of labour, and more importantly the skills contained within, is a concern in retail and its associated distribution sector.

There is also the recent fluctuation on the currency exchange market to consider. On 22 June 2016, the day before the EU referendum, the pound was trading at €1.30. By early July, it had fallen to €1.16 and, by 23 June 2017, it was at €1.13.

It’s a similar story when comparing the pound to the US dollar – the post-referendum period has seen lower values for sterling than at any time in more than ten years. All of which pushes up costs for businesses buying in goods and services from overseas.
(Source: forex data taken from XE.com)

What the implications might be in post-Brexit Europe for regulations and the bureaucracy of cross-border trading are presently anyone’s guess. To speculate on them here would be of limited value, but this complete lack of any certainty, or even a coherent strategy, is a problem in itself.

However, rather than sit around waiting for politicians and civil servants to do something, the business community has been getting on with life. Despite, according to a news story in InternetRetailing in June, “68% of UK retailers have yet to start planning for Brexit”, some others are meeting the European question head-on.

Take AO.com and ASOS [IRDX RASO]. Both have distribution centres on the European mainland. Having stock located within the EU is advantageous on a practical level, of course, but it goes beyond that, giving such retailers a real sense of European identity. Not only are they physically part of the market they serve but as a result of that proximity, it is also likely that sales to the rest of Europe will grow – in volume, value and significance – potentially changing the culture and outlook of those retailers.

Will more British retailers ultimately seek out a second home on the continent? For the next year at least, and possibly for longer, your guess really is as good as our’s.

Mentioned in this piece…

ASOS

ASOS

IRDX: RASO

ASOS is a global online fashion retailer offering both branded and own label product lines across womenswear, menswear, footwear, accessories, jewellery and cosmetics. (more…)