The word ‘Brexit’ has been echoing through the microphones of international journalists for months now and, with the UK having voted to leave the European Union, British retailers are now going to feel the impact. In the aftermath of the referendum, Kantar Retail’s analyst team has identified a list of factors that need to be taken into account.
Due to a weaker pound-euro exchange rate, in the short and mid-term prices of fresh produce will increase, as most of it comes from the EU; British retailers will then try to source locally as much as possible, which is set to advantage those already having good relationships with farms and fisheries. Meanwhile, supply chain costs are also likely to rise because of higher trade tariffs, and talent will be less available across all levels, from manager positions to store staff.
As for the biggest supermarket chains, their performance will depend on their current involvement in other EU countries. Since its processing plants are UK-based Morrisons seems well-positioned to resist such pressures, whereas Tesco’s presence in Central Europe, Sainsbury’s partnership with Dansk Supermarket and Mark & Spencer’s French stores will be exposed to changes, affecting cash inflows and outflows. German discounters Aldi and Lidl appear to be better placed to absorb the negative consequences of Brexit, thanks to a strong focus on local produce and their great relationship with British farmers.
New long-term connections and laws have to be negotiated, especially about food labelling and packaging, data policies, environment and social rules. FMCG suppliers must do their part as well, understanding that hard times have come for both shoppers (less likely to spend) and retailers. The latter, in fact, are now being hit on three fronts, facing banking and financial market changes along with unprecedented challenges in hiring new staff and sourcing goods.