A third of retailers are unprepared for the prospect of a no-deal Brexit, new research has revealed.
According to a survey by Retail Economics and law firm Squire Patton Boggs – shared exclusively with Retail Week – 11% of retail businesses admitted they felt “very underprepared” for a no-deal scenario.
A further 22% said they had done “little to no preparation” for the UK leaving the EU on March 29 without a deal in place.
Just 15% of retailers said they felt “very prepared” for the cliff-edge scenario, while the remaining 52% suggested they had done “some preparation”.
In the survey of 26 retailers with combined annual sales of £100bn, more than a quarter of respondents (27%) said they had done no analysis to quantify the impact that a hard Brexit – and a consequent switch to WTO tariffs – would have on the costs of sourcing goods from overseas.
But all of the retailers surveyed thought no-deal would lead to an increase in sourcing costs. A third (32%) said there would be “significant additional costs”, while the remaining 68% said there would be “some” additional costs.
No retailers said no deal would have little impact, or lead to lower sourcing costs.
Supply chain management emerged as the biggest concern among retailers in the event of a no-deal Brexit, with 67% admitting this was one of their three biggest worries.
The availability and cost of labour was highlighted by 56% of retailers, while tariff costs and supply of products were both pinpointed as concerns for 48% of businesses.
Some 41% of retailers admitted they had not identified any mitigating actions they could take to avoid any new costs that may arise following a no-deal Brexit.
Almost all of the retailers surveyed (92%) said they had not participated in any government-run consultations about the impact Brexit would have on the industry.
Retail Economics chief executive Richard Lim said: “Leaving the EU without a deal would give the UK total sovereignty over trade, borders and immigration, but would mean the immediate emergence of new, expensive and disruptive checks and costs at the border for trade with the EU.
“It’s awfully concerning that over a third of retailers have done ‘little to no preparation’, or feel ‘very underprepared’ for a hard-Brexit when this scenario could unfold early next year.”
Lim added: “Retailers identified disruption to supply chains, labour availability and tariff costs as their three biggest concerns of a no-deal, yet just two in five said that they had identified any way to mitigate against these additional costs.
“Calls from some in the UK for an alternative Brexit deal are almost certainly in vain because there is no time to negotiate one and there is no appetite from the EU to do so.”
Squire Patton Boggs partner and head of retail Matthew Lewis said: “We work closely with a large number of retailers, across food, fashion, and health and beauty, and the survey results echo the same significant concerns we have been hearing from the industry.
“There have been numerous public predictions about likely disruption at UK ports and higher costs in the event of no deal, and the survey supports the view that a primary and urgent focus for retailers must be on their supply chain and how best to manage this going forward.
“Retailers are considering stockpiling and changing supply locations as ways of mitigating the impact but they all recognize that increased costs are inevitable. There are huge legal and economic ramifications of a no deal and both have to be considered together to identify ways of mitigating the biggest concerns for retailers.”