Third Quarterly UK Retail Brexit Trade Review

    View Authors November 2018

    Squire Patton Boggs and Retail Economics welcome you to the Third Quarterly UK Retail Brexit Trade Review. Thank you for your contributions, whether through taking part in the survey or attending our event on 24 October. From the feedback, it became clear that retailers are keen to know how their Brexit preparations compare with others in the sector. The findings of our review have been featured in Retail Week (subscription required).

    In this edition, we focus on two areas:

    1. UK Retail Brexit Trade Benchmark – How prepared are retailers in comparison to their peers?
    2. Preparing for a Hard Brexit – A tangible risk of new costs and administrative burdens will likely emerge.

    UK Retail Brexit Trade Benchmark

    On 24 October 2018, Squire Patton Boggs and Retail Economics hosted more than 50 meetings between the UK’s leading retailers and Brexit and trade experts. Throughout the meetings, it became apparent that retailers are keen to know how their Brexit preparations compare with others in the sector.

    We conducted an industry-wide anonymised online survey to further gather and quantify retailers’ opinions. The results of the survey are featured in this report to provide UK retailers with the opportunity to benchmark their Brexit preparedness against their peers and key areas such as immigration, supply of goods, customs red tape and tariff costs.

    In the event of a no-deal Brexit in March 2019, our survey showed that:

    • Over a third of retailers indicated they have “done little to no preparation” or feel “very underprepared” for a hard Brexit. The majority (52%) of retailers had done “some preparation” and just 15% indicated that they “feel very prepared”.
    • The majority of retailers surveyed (73%) have conducted some analysis to quantify impacts of additional duties that would apply under a WTO framework. This means more than a quarter of retailers have undertaken no analysis on potential additional costs.
    • Almost a third of retailers (32%) said they would face “significant additional costs” in the event of a no-deal scenario, and all of them suggested that a no deal would have detrimental impacts on sourcing costs.
    • Retailers feel that the top three concerns are (1) supply chain management and logistics issues (67%); (2) labour availability and cost (56%); and (3) tariff costs (48%).
    • More than two in five retailers (41%) have failed to identify actions that would help avoid new costs.
    • Retailers that have identified cost avoidance action, their measures include switching supply chains to the UK, stockpiling, currency hedging and employing temporary workers.
    • 92% of retailers said that they had not participated in any government-run consultations.

    Preparing for a Hard Brexit

    Following the agreement reached at the special EU Summit on 25 November 2018, there are now three possible outcomes to the Brexit process:

    1. Rejection by Parliament and/or the electorate of the Brexit deal, followed by a hard Brexit
    2. Implementation of the Brexit deal negotiated between the government and the EU
    3. A reversal of the Brexit decision to allow the UK to remain in the EU

    The possibility of a no-deal scenario remains a credible threat to the UK retail industry. In the event of a no-deal Brexit, retailers will need to tackle a raft of changes to the regulatory framework in which they operate. A tangible risk of new costs and administrative burdens will likely emerge. Nowhere will this be more evident than in costs and procedures for importing goods.

    We provide a methodology to help prepare retailers for the impact of additional costs, covering three primary stages:

    Stage 1 – Calculating the Costs of New Tariffs
    Stage 2 – Mitigating the Effects of New Tariffs
    Stage 3 – Influencing UK Trade Policy

    We also set out how retailers can get ahead of the Brexit benchmark, the actions that retailers should be taking and the support that Squire Patton Boggs and Retail Economics can provide.

    Please contact us if you would like to speak to one of experts.