We are currently entering into a period of extreme uncertainty for the retail sector in the United Kingdom. Brexit will undoubtedly have a profound impact on businesses and local shops, which are already suffering from lower footfall, reduced profits and cost-cutting measures.
There are several ways Brexit may affect the retail sector for both the better and the worse, according to a recent report by CMC Markets, a UK-based financial derivatives dealer. Firstly, there is a very strong trade link between the UK and the European Union, with the EU accounting for 44% of UK exports and 53% of imports — £274bn and £341bn respectively. How this trade will look after Brexit, or the end of the agreements in December 2020, is not yet known, but it could be similar to other countries in the European Economic Area. Because of this, there is a chance that retailers will face increased costs due to tariffs not currently experienced, the need to comply with two different regulatory policies — the UK and EU — and the possible impact of a loss of influence in the EU.
An effect of Brexit that will affect all of retail, but hit agricultural retail particularly hard, is the potential restrictions on freedom of movement leading to a reduced labour pool. Due to the reliance on an EU migrant workforce by many sectors, there could be difficulties in recruiting new staff as well as an increase in labour costs.
Furthermore, there is expected to be delays in the import and export of goods and disrupted supply chains. It is not yet known how this will affect farm shops, but considering the recent report issued to local councils about food supplies, there will no doubt be an impact — potentially both positive and negative.
The weakness of the pound is a real worry for much of the retail sector since it means less buying power when importing goods. However, as farm shops rely on locally sourced produce, this could have a lesser impact on them or even provide a small boost. In fact, the short-term impact of Brexit could see an increased international demand for British goods thanks to the weaker pound, which could certainly be capitalised on by farm shops and artisan producers. Furthermore, the CMC Markets report points out that locally-sourced and locally-produced goods could be more attractive when compared with those that are imported. This is already a trend in the food and drink sector but could be accelerated by Brexit, proving very beneficial for farm shops and artisan producers.