No-one can give a proper analysis of the precise changes that Brexit might impose on the retail sector but we can identify key areas to watch and, in a few cases, avenues for planning even if there is no immediate impact.
As all in the industry are acutely aware, whilst the longer term effects of Brexit are uncertain, there is mounting pressure for those looking to protect their brand and intellectual property rights outside the UK, for those who employ EU nationals who are anticipating increased labour costs, as well as the ever-present pressure on margins due to the weakening of the pound, the increasing costs of imports and fierce ongoing sector competition.
Brexit has increased the need for careful planning to ensure the right balance is reached between obsessive legal compliance and a sensible risk assessment approach.
Significant Impact post Brexit
- Freedom of movement is at the heart of the forthcoming Brexit negotiations. Immigration control is a likely outcome as is some form of work permit for EEA (EU) workers. Permanent residence for key workers living in the UK for five years is a sensible protection measure to take now. Right to work, regular training and reviews of the documentation and processes are going to be critical with ever more draconian powers of search and closure of business threats by the Home Office.
- With the increasing challenges of immigration, retaining and attracting the best talent will mean being more innovative as to how you incentivise, support and promote your staff.
- UK protection resulting from EU trademarks and registered community designs could be lost post-Brexit. It’s likely that transitional arrangements will be put in place but complacency would be foolish. An audit of trademark portfolios is a sensible protection measure to ensure none are vulnerable to cancellation for non-use as well as considering filing all new applications in the UK as well as the EU.
Potential Significant Impact post Brexit
- The import price of raw materials remains an important post-Brexit concern. Retailers will need to prepare for changes import tariffs as well as considering their supply chain and how their own exports into the EU may be impacted by tariffs. The ability of to vary standard terms of supply may need to be utilised if increased costs become inevitable into the longer term. It is certainly the case that retailers will need to assess what this means for them and start planning new supply chains, the complexity of which will doubtless increase.
- The VAT zero rating of intra EU purchasing will fall away and lead to significant increases in the cost of importing goods.
- Importing personal data, in particular useful customer data, from other EU companies without the need for special permission is currently something that UK business are free to do. Brexit may result in an, albeit temporary, loss of this right. Where retailers rely on this transfer of data they will need to consider temporary measures for any period during which this ability is suspended.
- Check your commercial terms to ensure there is flexibility on pricing and tax advice on hedging the risk if there are significant contracts now being considered.
Lower Impact post Brexit
- As a result of leaving the EU, the UK authority will no longer be required to enforce EU Competition Law, with the consequence that it may well spend more time analysing competition in local, domestic markets within the UK. If that transpires, it may mean that the activities of retail businesses will be subject to greater scrutiny.
- EU product standards will still apply to products sold into EU countries although not to those sold nationally. While those with a predominantly national focus may benefit from this any companies exporting into the EU will need to be careful to maintain and observe these standards across the board.