Three years on from Brexit and the impact to retailers and consumers has been relatively limited. However, in many ways, the most difficult bit is yet to come, says British Retail Consortium’s Andrew Opie

Brexit chessboard

Brexit has certainly been bad news for UK-based retailers operating stores in or sending parcels to the EU.

The costs and delays arising from new customs checks, particularly for food, have made competition with the EU harder.

Although retailers have largely adapted to the new arrangements, the loss of the single market has reduced opportunities for UK retailers. 

“One of the biggest negative impacts of Brexit has resulted from the end of freedom of movement, which has had an impact on labour availability”

Those retailers with stores in Northern Ireland have also incurred some additional costs to maintain supply chains, but it is more limited than if the protocol had been fully implemented. 

Probably one of the biggest negative impacts of Brexit has resulted from the end of freedom of movement, which has had an impact on labour availability throughout the supply chain, increasing problems in key areas such as logistics and production.

Meanwhile, EU retailers have not seen the same issues. 

That said, retailers in the UK are largely operating much as they did before 2020. The tariff-free deal with our biggest trading partner, the EU, avoided adding even more inflationary pressures.

The UK borders remain largely open, with limited controls on EU imports, and our regulatory regime remains virtually unchanged. 

The truth is that it will be in the next few years that we are likely to see the impact of Brexit affecting retailers.

Firstly, towards the end of the year, the government will begin to introduce UK border controls. By early 2024, all imports will be subject to full checks, including inspection at the ports.

Although the government is working on a streamlined system, delays and costs will be inevitable. 

Secondly, the government is aiming to negotiate a long-term agreement with the EU to resolve problems with the Northern Ireland protocol.

We hope this will deliver a simple system that allows retailers to use their extensive and traceable digital records to demonstrate that certain goods will only be sold in Northern Ireland.

Unfortunately, we are yet to see the latest plans and what, if any, changes to the current approach will mean in terms of additional controls and costs. 

Finally, our regulatory system will diverge. Postponed requirements for new labelling of products will come into force, meaning potentially different product and safety regulations that diverge from the EU and are likely to add complexity and cost to supply chains.

So the negative impacts of Brexit for retailers, particularly in their supply chains, are yet to be felt but remain clearly visible on the horizon.

But what about the positive aspects, the benefits promised to the UK in terms of an independent trade policy that would deliver savings in the supply chain?

The most important trade deal was struck before we left – the deal with the EU. This accounts for 80% of our food imports and a significant portion of our non-food imports.

Similarly, the government has replicated the favourable trading arrangements with developing countries, which represent almost 40% of non-food imports. 

“We need to prepare the best we can to mitigate the impact on supply chains, particularly preparing European suppliers for new border controls”

However, there remain some big potential trade deal wins. Research with our members prior to Brexit suggested that deals with China, Brazil, the US and Thailand could all bring significant benefits to UK retailers – unfortunately, there is little sign of any of these coming to fruition soon.

In fact, of the top five countries where a deal would make a difference for retail, only an Australian deal has been achieved and that is only minor when compared with the benefits of a deal with China and others. 

So three years on and Brexit is far from done for UK retailers. We need to prepare the best we can to mitigate the impact on supply chains, particularly preparing European suppliers for new border controls.

Similarly, all retailers with stores in Northern Ireland will need to follow discussions over the protocol carefully and act accordingly once there is an agreement with the EU. 

The government must also pursue new trade deals with vigour, creating opportunities for expansion and reducing supply chain costs.

There are some signs that a US deal (number four on our members’ wishlist) will be the next one, but the others remain little more than a pipe dream at present. 

The British Retail Consortium will continue to lobby the government on these issues. A key ask from our campaign A Fair Brexit for Consumers was met – a tariff-free deal negotiated with the EU was achieved.

Without that, retailers and consumers would be in a far worse position than they are even in these challenging times. 

Ultimately, Brexit is what we can make of it, but more action will be needed by the government to make the most of the UK’s new life outside the EU. 

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