Theresa May (UK Prime Minister and Leader of the Conservative Party) has launched a General Election in the UK, due to take place next week on June 8th. Although this election is to decide who will govern the UK going forwards, whichever party wins must be able to cope with the pressure of knowing how to make the best of ‘Brexit’.
Since Brexit was first voted in last year, there has been quite a bit of uncertainty and upheaval. The global population is in shock that Brexit has actually been voted in, consumers aren’t sure whether to spend now or save for later and retailers are left with a lot of uncertainty about their profits and whether consumer spending habits will continue to change. And these outcomes aren’t only impacting the UK, they have a global impact.
With Article 50 triggered and now that Theresa May has called for a snap election – are we going to see the same levels of uncertainty that we saw last year? And how might this impact you, as a global retailer? Let’s discuss…
Changes to the international workforce
Historically, the UK has been a fairly popular country for other nationals to emigrate to. However, if there are to be changes in the way that the borders are managed, then we could see a dip in the amount of new people coming into the country. This could have an effect on your workforce and where you’re going to find your warehouse, logistics or temporary seasonal staff. If you’re planning to hire new staff close to Brexit, you may need to do some extra planning ahead to workaround a potential reduction in people to recruit from.
Additionally, the Conservatives have claimed that they will double the charge levied on companies who choose to employ non-EU workers, increasing from £1,000 per year to £2,000 per year. Although this charge will be for UK companies only, this does have an impact on the global working population if retailers are less likely to hire migrant workers.
Changes to minimum wage
If a Labour or Conservative party win this election, there are likely to be changes to the minimum wage. Although, both parties are claiming this will make employment more attractive to the UK population, business owners around the world are concerned about how this may affect their profits. It’s possible that this increase in wages will need to be matched with reduced profits, higher prices and lower earnings at an Exec level.
According to a recent article by Drapers, Executive Chairman and Founder of The Dune Group, Daniel Rubin has said: “I’m concerned the government is coming across as business-unfriendly… their priority should be more investment and working with businesses to improve UK economic performance.” Although retailers are calling for governments to reconsider these decisions, we say: if you’re planning for international growth, you should plan ahead in case there are changes to the minimum wage, and consider this within your own business decisions.
Changes to import tariffs, corporation tax and exchange rates
Research suggests that 53% of UK retailed products were imported from other European countries last year. With an uncertainty about the future of the UK and its relationship with the EU (and of course, the safety net of EU trading laws lifted from the country once Brexit is in place), we could see an increase in import tariffs and costs. Furthermore, the Labour party are claiming to increase corporation tax from 19% to 26% if voted in, affecting how much you may decide to charge for your products.
Do you remember the graphs of the falling pound last year? We certainly do! The future of the pound looked quite bleak for a while, which meant that exchange rates fell out of kilter and interest rates increased. When buying and selling goods abroad, this would have impacted the prices you were quoted and may even have had an impact over what prices you gave to your own customers as well.
All of these types of change could affect how much you decide to charge your customers to help cover increased costs and changing exchange rates, so you should bear all of this in mind when planning your pricing strategies across the next few years.
Cautious customers and changes in consumer spending
We saw it last year. No-one knew what was going to happen so consumer spending also took a brief dip. Shoppers were hoping they might see prices decrease a week or two after browsing, so pocketed their money to be spent later. They also didn’t know what was going to happen to their favourite stores or to the retail industry in general. Although, this dip only lasted approximately 3 months – October 2016 saw record growth in consumer spending – there was an impact, which we may see again. Plan ahead and ensure you’re taking this into account when planning your budgets and financials.
Despite seeing what happened when the vote on Brexit first occurred and seeing what has happened since then, we know that there is still a large amount of uncertainty around. And with this new election happening next week, how much more uncertainty are we going to see? There may not be an answer to that question for some time, so our advice to you would be to make the most of the situation as best you can, plan ahead and focus on everything that is within your control.
And remember, it’s not all doom and gloom! There are always ways in which you can tackle the current and uncertain situation. Take a look at some of our latest tips about how you, as a retailer, can beat Brexit.