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A year till Brexit: a retail progress report

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The UK is on course to make its official departure from the European Union a year today. We’ve gathered together some voices from the retail industry and related sectors on the subject for a progress report.

Helen Dickinson, chief executive of the British Retail Consortium : on the need for tariff-free trade

“With exactly a year to go to Brexit day, last week’s breakthrough in the negotiations logjam couldn’t have come soon enough. The agreement on a framework for a standstill transition period is something we’ve long argued is vital to avoid a cliff-edge by giving businesses and government time to adjust, plan ahead and invest.

“Another encouraging development comes from both the UK and EU-27 negotiators appearing committed to a tariff-free deal, which is important for consumers. This is particularly important for food as around 20% of products sold in a supermarket are imported from the EU and adding high tariffs would have a significant impact on hard-pressed consumers.

“Securing tariff-free trade with the EU is only part of the equation for sustaining low prices and availability of goods for UK consumers. Retailers also need a deal that helps them fulfil the skills requirements of an industry undergoing profound transformation. From distribution and stores, to head office, there’s no doubt that our EU colleagues make a vital contribution to British retailers’ ability to deliver the goods consumers want, when they want them and they deserve certainty and security to continue living and working here.

“There will be opportunities for consumers from better trade deals and new markets, but the risk of not achieving a deal with the EU is enormous and its impact would be felt immediately by millions of us from the transition’s end. So over the next few months until the June European Council and beyond, the negotiations should focus on reducing potential customs friction and creating a new immigration system fit for the future.”

Sally Gilson, head of skills at the Freight Transport Association: on this week’s Migration Advisory Committee’s interim report into the status of workers from the EEA

“[The report] has confirmed what the logistics sector already knew, however it is yet to provide the clarification which our members require on the future status of European workers in the logistics industry.

“This lack of certainty over workers’ future status is causing huge concern for employees as well as employers, which rely on European labour to ensure that Britain’s supply chain continues to operate at the optimum level. Government needs to take note of the interim report and decide future systems now.

“Of particular concern are those lower skilled EU workers, who under current migration systems would not be considered eligible for special terms under the skills shortage occupation list. These workers provide vital manpower in an industry which is often highly labour intensive, and their contribution to Britain’s trading relationships cannot be ignored. It is encouraging that the final report will investigate whether the skills shortage occupation list methodology needs to be revised, to accommodate these vital professions, but that work will come too late for logistics businesses which need certainty on workforce levels now to plan with confidence for the future.”

The FTA says the logistics sector is heavily reliant on EEA workers, with 14% of LGV drivers, 12% of van drivers and 24% of warehouse workers from those countries, especially the new member states. Logistics is currently experiencing an LGV driver shortage, with 52,000 vacancies already registered and more likely to occur as European workers leave to return home as Britain’s departure from the European Union approaches.

“Although employers are working hard to fill the skills shortages that the sector is already experiencing, skills funding is not necessarily directed in the correct way to do this,” Ms Gilson said. “At this time employers still don’t know what the post Brexit immigration will look like and how onerous the administration process will be. It is hard to prepare for an unknown future, particularly when it is unclear what training will be provided, and who needs to be trained.

Gary Lynch, chief executive of supply chain and data standards organisation GS1 UK: on continuing demand for British goods

“British produce remains a byword for excellence around the world and our food and drink is exported to the four corners of the globe. With official Government figures showing that £22bn of it was sent overseas in 2017, there is clearly a lasting taste for British products and our members have optimistic expectations for the coming years. Whisky and salmon are very much our export staples, but the thirst for our beer and gin also continues to intensify.”

GS1’s Brits Abroad: UK Food & Drink Exports in 2018 finds 15% of food and drink manufacturers’ business is now exported. That’s up from 11% five years ago, and expected to rise to 23% by 2023. In 2017, UK food and drink exports were worth about £22bn.

Paul Souber, head of Central London retail at Colliers International: on continuing demand for UK and London store sites

“Following the Brexit vote, sterling devalued significantly, making London more attractive to tourists; particularly those from China, the UAE, Saudi Arabia and Kuwait, who quickly began taking advantage of the ‘Brexit bargains’ on offer. Of these, Chinese tourists were the biggest contributor to international sales, accounting for 35% of tourist spend.

“As a result of the currency-led tourist boom, many retailers noticed an escalation in shopper footfall and we initially saw a rise in the number of active requirements as a result. However, with shopping habits increasingly moving online and an uncertain UK economy slowing the rate of consumer spending, many retailers are feeling financially squeezed and are subsequently focusing more on controlling their overall occupational costs.

“The focus on the bottom line coincides with a recognition from brands that their bricks and mortar stores must be repurposed so that they seamlessly connect and enhance all parts of their retailing platform, be that online or instore.

“In practice this translates to retailers being more discerning over the number, size and location of physical stores and, in turn, these stores become more experiential and personalised.

“As consumers become more time challenged, it is essential that the locations they visit provide them with a convenience led menu of experiences, from great shopping to a huge array of dining and entertainment options, cultural experiences, health and fitness pursuits, relaxation and leisure, all easily interconnected and accessible by transport and digital infrastructure.”

Tim Walker, managing director of IT services provider Aura Technology: on preparing for Brexit

“A year to go may seem like a long time, but businesses are acting now to mitigate any problems and also to capitalise on the opportunities that Brexit brings.

“We work extensively with mid-market businesses, and what we are seeing is that the smartest ones have one eye on a post-Brexit Britain and are actively looking to invest in their technology whether their business is domestic or international. I would predict that Brexit, combined with regulations such as GDPR, will see more and more organisations reviewing the operational aspects of their business over the next year as they look to ensure compliance, maximise efficiency and reduce costs.

“There will undoubtedly be challenges ahead, but I think many businesses see it as a great British opportunity. As a nation we have always been innovators and there are a growing number of entrepreneurs among us, so I see no reason why we can’t approach Brexit with an overwhelmingly positive attitude.”

Retail Economics and Squire Patton Boggs: on the potential cost of no deal

The analysis from these two organisations suggests £7.8bn could be added to the cost of retail goods if the UK fails to agree on a deal with the EU. They say the risk of higher costs from new tariffs is greatest for food and drink from the EU.

“Firstly, the exposure of the UK market to imports from the EU is the highest compared with any other retail sector, with more than 70% of UK food and drink imports originating from within the EU.

“Secondly, the standard rate of tariffs that would apply to imports of EU food and drink is far higher than the rate for non-food goods, with duties for some meat and dairy products rising to 80%.

“Thirdly, to continue tariff-free trade in food and drink post-Brexit, the EU is likely to demand compliance with a wide range of non-trade regulations which may be difficult for the UK to accept.

“Fourthly, potential alternative non-EU sources of food and drink are limited by either high tariffs and/or non-tariff barriers.

“Finally, any new immigration system for EU citizens would need provision for non-graduate labour to ensure that the UK retail industry has access to the workers it needs or we could see a rise in labour costs due to competition within the industry and its supply chain.”

Taken by Chloe Rigby

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