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SPECIAL REPORT What could a no-deal Brexit mean for retail?

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As plans to suspend Parliament gather momentum and a no-deal Brexit looks increasingly likely, the impact on online retailers is set to be huge – but exactly are we looking at?

Sales take a hit

The obvious casualty will be sales – with consumer confidence potentially plummeting if we crash out of the EU on 31 October.

The British Retail Consortium has joined with the Northern Ireland Retail Consortium and Retail Ireland to warn that some goods will suffer reduced availability while household budgets would also be squeezed should the UK Government fail to get a deal with the European Union before March 29. 

Tariffs, of up to 45% on some everyday food items, and new regulatory checks, likely to mean more time spent on passing customs, would drive up the costs of supplying food to consumers if the UK and the EU countries revert to standard World Trade Organisation most favoured nation tariffs, the organisations warn.

Earlier this year – just ahead of the original March Brexit deadline – leading grocers joined with the BRC in warning of the impact of a no deal Brexit. Sainsbury’s, Asda, M&S, The Co-op and Waitrose warned of the food shortages that a no-deal Brexit would cause.

“While we have been working closely with our suppliers on contingency plans it is not possible to mitigate all the risks to our supply chains and we fear significant disruption in the short-term as a result if there is no Brexit deal,” the group said in the letter.

Peak takes a hit

The long-worried about impact is of course sales – and crashing out of the EU on 31 October is going to potentially have a massive impact on Peak. If the UK does leave on Holloween, there could be problems with supply of goods, consumer spending confidence and widespread panic: all just when retailers are usually gearing up to make a big push to sell, sell, sell in the run up to Christmas.

Back in June, Tesco warned that getting ready for a possible disorderly no-deal Brexit in October would be far more problematic than preparations it made for the original planned departure date in March, Chief Executive Dave Lewis told shareholders at the start of the summer.

The group built a stockpile of more than £200 million worth of long-life food products by the end of March to help it cope with any disruptions to supply, he said.

When Brexit did not happen the retailer sold that stock through and it currently does not have any additional stock.

“For us to be able to do what we did in March in October will be more difficult because we won’t have the space in our logistics system to be able to cope because we’ll be preparing for Christmas and the seasonal peaks that are there,” Lewis told the annual shareholders’ meeting at Tesco’s headquarters in Welwyn, north of London, which was webcast.

He reiterated that if there was a disorderly no-deal Brexit, sourcing fresh food would also be a major issue as Tesco imports about 50% of the fresh food it sells. “The question is – is there a delay at the border, is there a tariff (to pay)? That’s where the biggest sensitivity for our industry will be,” said Lewis.

Joe Farrell, Vice President of International Operations at PFSagrees: “Peak demand can be difficult for small to mid-sized businesses to predict at the best of times, let alone in a time of such uncertainty. With the date of the UK’s withdrawal from the EU now so close to peak season trading, brands will find themselves with very little time to react if there are major consequences. 

Consumer rights take a hit

There could also be unforeseen impact on shoppers buying online from both within and without the UK, because Brexit may have a considerable impact on UK internet shoppers’ consumer rights – and on the protection offered to European Union (EU) online shoppers buying British goods.

UK internet shoppers’ current rights to return almost any item within 14 days, even if they are not faulty, were introduced in 2014 only because the UK Government was forced to match the EU Consumer Rights Directive. ParcelHero’s Head of Consumer Research, David Jinks MILT warns that: “After Brexit there is nothing to stop the Consumer Contracts Regulations being repealed, as the European Union Withdrawal Act will end the authority of EU law in the UK.”

According to Jinks: “That means our EU-based laws can be overturned by the Government in the future, potentially spelling a return to the bad old days of the former UK Distance Selling Regulations: which gave just seven days grace before sending back unwanted goods. A week is not a long enough time for busy consumers to discover that a product doesn’t fit or live up to their expectations.”

Similarly, EU shoppers buying British goods online will also find they are less protected. “For example,” says Jinks, “Ireland’s consumer regulator, the Competition and Consumer Protection Commission, has already launched an information campaign  warning that If the UK leaves without a deal, Irish shoppers buying from British stores won’t be protected by the EU’s consumer laws. It says the legal footing for consumer rights will revert from a statutory basis to the terms and conditions of the British company from which an item is being bought. And that could well make British goods less attractive in the EU – especially as, under WTO rules, there will already be VAT to pay on the value of items plus shipping if they are worth over €22, and duties on items worth over €150.”

And the international parcel price comparison site is also warning UK shoppers buying from EU-sellers, including Amazon traders, could be similarly impacted to their Continental counterparts.

It points out the Government’s own guide, Buying things from Europe after Brexit, admits “If the UK leaves the EU without a deal, you may have to deal with the court system in the country you bought from to get compensation”.’ 

It also cautions UK shoppers may be charged more for using credit or debit cards to pay for things in euros when they buy from companies in the EU, Iceland, Liechtenstein or Norway; and concedes payments may also take longer.

“No matter where they live, there really don’t seem to be many upsides for online consumers to a no-deal Brexit,” concludes Jinks. “And that in turn means lower sales for Britain’s online retailers, currently the only retail sector looking at all healthy.”

Plan for chaos, say business leaders

With a no-deal Brexit looking more likely than not, business organisations are warning of dirconsequences and are telling all businesses to prepare for the the worst.

Allie Renison, head of Europe and trade policy at the Institute of Directors, said: “Following all the parliamentary manoeuvrings is nigh-on impossible for directors who have an organisation to run, but clearly the chances of no deal appear to have elevated. Most of our members say a disorderly Brexit would be detrimental to their business, but we urge firms to make whatever preparations they can.”

A spokesman for the Confederation of British Industry told The London Evening Standard: “No matter how much preparation the Government and businesses do for no deal, only a good deal with the EU protects jobs, communities and the economy. This must be the relentless focus of politicians.”

Peter Bishop, chief executive of London Chamber of Commerce and Industry, adds: “Most of London’s businesses want the avoidance of a no-deal Brexit. They want trade with Europe to be as straightforward as possible, and they want access to balanced immigration of all skill levels. The political battles are largely immaterial to them, but it’s imperative we reach that outcome.”

Meanwhile, the government is attempting to help. Business Secretary Andrea Leadsom today unveiled a £10 million grant scheme for business and trade associations to help them prepare for Brexit. Leadsom’s department has also published advice for preparing for businesses for Brexit

Good luck everyone.

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