What will the incoming Conservative majority government mean for online and multichannel retailers? We take a look at the Conservative party manifesto, the October 2019 EU UK Withdrawal Agreement and hear from the British Retail Consortium and analysts to read the runes.
Cross-border trade with the EU
The solid Conservative majority in yesterday’s General Election makes it all but certain that the UK will leave the European Union (EU) in the coming weeks. But while passing the EU UK Withdrawal Agreement, as agreed in October 2019, could be completed before Christmas, it will only be the first step towards agreeing an eventual trade relationship with the European Union – and that’s what will matter to retailers importing materials from, and selling goods to, customers within the EU and the related European Economic Area. It’s in the future relationship, which will be negotiated following the passing of the Withdrawal Agreement, that import and export tariffs will be set, along with agreed standards for goods and services – which may include new barriers or divergence from existing standards.
The draft Withdrawal Agreement currently stipulates, in the words of the House of Commons library briefing, that the UK will “no longer be in a single customs territory or union with the EU”. However Northern Ireland will be in a customs union with both the EU and the UK, and will remain aligned to the EU’s regulations on goods for four years following the transition period, which is currently expected to come to an end in December 2020. The Conservative manifesto says that the UK will not extend that transition period, raising the continued possibility of a no deal exit from the EU if no deal has been agreed. Here’s our previous guidance on what that would mean for online and multichannel retailers.
Helen Dickinson, chief executive of the British Retail Consortium, today said: “It is … vital over the coming days and weeks that the Government commits to bringing clarity on the UK’s future relationship with the EU and pursues a fair deal for consumers that maintains tariff-free, frictionless trade with the EU.”
Many retail and logistics industry workers are originally from the EU. The Withdrawal Agreement says that free movement will continue until the end of the transition period – with EU citizens gaining permanent residence rights if they are living in a host state before the end of transition, “subject to certain requirements”. UK and EU states will have the discretion to require people to apply for a new residency status – and the UK has already been registering people under its own EU Settlement Scheme. After the end of the transition period, movement of citizens between the UK and EU will depend on the future trading agreement.
The Conservative party manifesto says there’ll be a “firmer and fairer Australian-style points-based immigration scheme” aimed at attracting “the best and brightest from all over the world”.
It is not clear how retail staff, warehouse workers, and lorry drivers will be rated on a points-based system. The Conservative manifesto says: “There will be fewer lower-skilled migrants and overall numbers will come down.”
The manifesto says there will be a start-up visa scheme to help the UK attract “the entrepreneurs of the future”.
A £3bn national skills fund
This aims to ensure businesses can find and hire the workers they need, giving matched funding to individuals and SMEs for education and training.
Broadband for every home and business
The manifesto promises full fibre broadband to every home and business by 2025. This, it says, will help put businesses in touch with their customers around the world.
Digital Services Tax
This is part of a manifesto tax pledge to ensure that “major multinationals pay their fair share of tax”.
Increase R&D tax credit rate to 13%
The manifesto says that this will incentivise investments in cloud computing and data.
On the high street
Business rates and high streets
The Conservative manifesto said it would review the business rates system in a way that will “protect your high street and community from excessive tax hikes”. It said its Towns Fund would cut taxes for small retail business as well as music venues, pubs and cinemas, while funding would go to 100 towns, at first, to improve their local economy. The British Retail Consortium today called on the incoming Conservative government to take action to fulfil its promise on business rates – and to to look again at the Apprenticeship Levy and to address violence against retail workers.
The BRC’s Dickinson said: “We look forward to working with the new Government on the many issues facing retailers. The Prime Minister must now fulfil his manifesto pledge and urgently begin a fundamental review into the broken business rates system to relieve the burden on retail businesses and create a system fit for the 21st century.”
She added: “Retailers employ three million people across the UK, making the industry the UK’s largest private sector employer. It is therefore important that the Apprenticeship Levy is made more flexible to enable the industry to use funds for any form of accredited training to suit its skills needs and create a workforce fit for the future.”
And she continued: “With retail conditions the toughest they have been for a decade, the Prime Minister must act to support the successful reinvention of retail locations and local communities. We look forward to working with Ministers on a strategy to strengthen the retail industry during this period of unprecedented change.”
The analyst view
Patrick O’Brien, UK retail research director at GlobalData, says that regardless of politics, “the result is at least decisive, and offers retailers some short-term relief after what has been a slow start to the Christmas shopping season so far.”
He added: “With two weekends left before Christmas, retailers may see some extra spend unlocked, now that the immediate path to Brexit appears to have cleared. Retailers will also be boosted by the strengthening pound, now at a three-year high against the dollar.
“Retailers may also enjoy a good start to 2020, as the confirmation of Brexit at the end of January brings further clarity at least, whichever side of the remain/leave divide you are on. Any boost may be short-lived though, as negotiations on a trade deal with the EU begin; we expect brinkmanship to resurface especially as the end-of-2020 deadline for negotiations gets closer.
“Retailers also need to put further pressure on the Conservative government to make good on its manifesto pledge to have a fundamental review of business rates. Such reviews have been promised before, but only resulted in tweaks which have done little to relieve the stress that retail chains are under. We will see if this government has the appetite for radical changes to the system, but with the implementation of Brexit ahead, and the difficulty of pushing any of the burden lifted from physical retailers to others (whether it be consumers, online retailers or other businesses), progress on the issue is likely to be slow.”