Sir Ian Cheshire and Jacqueline Gold weigh in on the effect Brexit will have on UK retailers’ international businesses and supply chains.
Uncertainty has dominated retailers’ opinions today on the impact that the Brexit will have on their international operations.
The effect of importing products and new trade deals were raised as key issues for retailers.
Debenhams chairman and former Kingfisher chief executive Sir Ian Cheshire tells Retail Week: “For UK retailers, bringing product across the borders will become more difficult because of the exchange rate.
“The basic fact is that the more you import, the greater an issue Brexit will be.”
“It’s not like you can cancel your gym membership and rock up on the treadmill the next day,” she said. “We have to make compromises and there will be a premium to pay”
Jacqueline Gold, Ann Summers
In the short term, retailers’ ability to import goods from the EU will be hurt by the exchange rate. Kantar Retail predicts “nearly all retailers will look to source locally”, meaning that retailers with strong supply chain ties in the UK would be the most resilient.
However, some retailers could stand to gain from currency fluctuations. Stifel analysts released a statement saying that Tesco could “benefit from translating international profits”, while Haitong analyst Tony Shiret told Retail Week that Kingfisher’s profits could even edge up because it generates some of its earnings in euros and Polish zloty.
Nevertheless, the renegotiation of trade agreements with the EU could have a longstanding impact on UK retailers.
Ann Summers chief executive Jacqueline Gold said the Government would need to ensure it kept access to the UK’s single market and negotiate “the best exit trade deal we possibly can”.
However, she was wary of the amount of time negotiations would take, saying that it took the UK 11 years to negotiate its trade deal with China and four years with Canada.
“If the exit is awkward it could take a very long time and it’s an enormous spanner in the works in terms of knowing how to price and resource properly”
Sir Ian Cheshire, Debenhams
Gold also believed the EU would not be inclined to give the UK a lenient exit deal.
“It’s not like you can cancel your gym membership and rock up on the treadmill the next day,” she said. “We have to make compromises and there will be a premium to pay.”
Cheshire echoed this sentiment.
“We don’t know how long it will take to renegotiate trade deals,” he warned. “If the exit is awkward it could take a very long time and it’s an enormous spanner in the works in terms of knowing how to price and resource properly.”
Springboard’s insights director Diane Wehrle said the freedom that the Leave campaign said Brexit would offer UK trading was “a red herring”.
“If you want to trade in a market that has certain rules and regulations then you have to comply, so the UK will still be subject to the ‘red tape’ of the EU,” she said.
“Anything that creates barriers to trade cannot be a positive for retail.”
The appetite for international expansion among UK retailers does not seem to have been diminished by today’s result, however.
Cheshire said that he did not foresee “much of an issue” with Debenhams’ European operations and Gold said that international expansion was still one of Ann Summers’ “top priorities”.
Haitong analyst Tony Shiret did not believe Brexit would have a negative effect on UK retailers’ ability to expand internationally or trade overseas.
“It is already more expensive to trade here than elsewhere because of business rates and rental costs. The UK is already a challenging environment for retailers and that was before Brexit”
Diane Wehrle, Springboard
“I wouldn’t have thought it would be a big issue. We don’t have problems investing in the US, for example,” he said.
But Wehrle believed Brexit will prohibit the inclination of international retailers to set up shop in the UK.
“As a business person looking to expand you go the easiest option, so this will potentially prohibit trade for retailers looking to expand to the UK,” she commented.
“It is already more expensive to trade here than elsewhere because of business rates and rental costs. The UK is already a challenging environment for retailers and that was before Brexit.”
She added that international retailers with an existing UK retail presence “will be looking at their business and the viability of those stores now”.
While the level of impact Brexit will have on international trading remains unclear, retailers were adamant that they would adapt their businesses to weather the storm.
Cheshire said he was “disappointed” by the result but remarked “we have to get on and deal with it”, while Gold said she would “be optimistic as a business leader.”
Co-operative chief executive Richard Pennycook stressed that the European workforce should not despair at the result.
“What we’ve been very conscious of in our messaging is that we have a good number of colleagues from other European countries,” he said.
“It is more relevant for them than it is for a lot of other people and we wanted to be clear that we would be poorer without them.”
- For full coverage on Brexit and its impact on retail, click here