Life after Brexit? Risks and Opportunities for U.K. Retailers

Rising inflation, less favorable exchange rates, higher import costs…these are but some of the challenges facing U.K. retailers in the post-Brexit world. As part of a series of updates on the effects of Brexit on various U.K. industries, Willis Towers Watson recently released its insights on the retail industry.

Our findings highlight both the risks and opportunities of Brexit. To successfully navigate the Brexit headwinds, it’s critical for retail firms to revolutionize their business models. Customer-centricity, efficiency, cost-extraction and agility should be the cornerstones of a post-Brexit response strategy.

Identifying the risks

  • Tariffs costs. If a suitable trade deal is not negotiated, import duties may be imposed by the EU on products made in the U.K., and U.K. retail firms that manufacture in Europe may need to reorganize their supply chain.
  • Supply chain disruptions. Not only are some U.K. retailers considering changing suppliers, they are also thinking about sourcing from different countries following Brexit.
  • Talent pressures. Many retailers may find it more difficult to recruit for relatively unskilled roles in their supply chain, distribution centers or warehousing.
  • Increasing pension deficits. Britain’s biggest retailers are grappling with a £6bn jump in their pensions scheme deficits, which threatens to dwarf stock market valuations and the industry’s profits for the year.

 Uncovering the upside

  • Retailers who become more agile in the ever-changing retail environment will be in position to take advantage of Brexit. Retailers should be looking to further personalize the shopping experience and aim to understand their customers better so that they can spot opportunities earlier.
  • The vote to leave could increase the importance of U.K. goods. U.K. luxury might be a key sector likely to benefit from Brexit, given that the “British” brand exports well. There might also be a spike in demand online from international customers wanting British goods who are seeking to take advantage of the weak pound.
  • New found freedom in the supply chain. In theory, retailers can start to buy in the cheapest markets, and tariffs that the U.K. imposes on imports may be lower than the E.U. ones or even zero – in food imports, for example.
  • Inbound investment to rise. The U.K. retail sector was also flagged as a rich hunting ground for foreign buyers, especially given the weaker sterling and its impact on valuations.

Read the complete update on the U.K. Retail Industry post-Brexit.


 

Kelvyn Sampson is Willis Towers Watson’s Retail and Leisure & Hospitality Industry Practice leader, providing thought leadership and developing bespoke solutions designed to assist retail clients in managing their risk exposures. He has almost thirty years’ experience in insurance and risk management.

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