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Brexit delay 'worst outcome' for retail

Retail leaders have called for a quick resolution to Brexit, as continued uncertainty is “extending the agony” ahead of the crucial peak trading period.

After Commons speaker John Bercow refused the government’s request for a vote on its Brexit deal, a Withdrawal Agreement Bill was published on Monday night.

To complete Brexit by the deadline of 31 October, the government has proposed three days of scrutiny of the 110-page bill. This would allow proposals to complete the Commons stages by 24 October.

If the Withdrawal Agreement Bill is passed, a Brexit deal is expected to be agreed by parliament on or soon after 31 October. However, if it fails, the Council of the European Union will decide whether to grant a further delay, or impose a no-deal Brexit.

Industry leaders have told Drapers that a further delay to Brexit would be “the worst outcome for all retailers”.

“The worst result is if there is an extension and it goes on even longer. It’s extending the agony,” said the chairman of one fashion multiple. “If you believe the figures [about companies blaming profit warnings on Brexit], then you have to believe that continued uncertainty will only bring more problems.”

EY’s Profit Warning Report shows that in the first nine months of 2019, retail profit warnings hit their highest rate since the financial crisis,  and 43% of those were in clothing. In the three months to 30 September, 22% of profit warnings cited Brexit as a cause, up 10% on the first quarter of the year.

“We’ve had too many years of uncertainty. It’s time to get on one way or the other,” said Simon Poole, managing director of menswear chain Luke 1977. “We’re feeling it now and need a resolution. Customer confidence has dropped and has gotten worse in the last eight weeks.

“We noticed [sales] slowing down in September and October, and our competitors have introduced some quite serious price increases in the last 18 months because of the impact on the pound. There’s been a lot more discounting this season, which is always a sure sign that people are having a tough time.”

Consumer spending is predicted to rise by just 0.8% over the key peak trading period – the slowest rate of growth for three years, the Centre for Retail Research has forecast. Its annual Shopping for Christmas report, commissioned by VoucherCodes.co.uk, warned consumer confidence has hit a 10-year low amid Brexit worries.

Superdry CEO Julian Dunkerton, who donated £1m to the People’s Vote campaign for a second referendum, said: “A hard Brexit would be a total disaster for the nation. Inflation will be rampant. We would be voting for the country to commit economic suicide.

“Currency fluctuations are the biggest issue that most people are having to deal with, and every time we edge towards a harder Brexit the pound devalues. Even if Boris’s deal gets through, the deal is not done. We will be in limbo, and we have no idea of the terms and that halts investment.”

While Dunkerton wants a second referendum to “give clarity”, others are calling for a deal to be agreed to curtail the ongoing uncertainty.

One retail chairwoman told Drapers: “It’s very hard to plan for businesses and the less runway we have to plan, the more likely it is volatility will feed through. The most important thing is certainty, whatever the next course of action is.”

Retail consultant Erica Vilkauls, former CEO of LK Bennett, added: “A delay has to be the worst outcome for all retailers. With landlords not helping with rents, and the government not helping with business rates, retailers are hindered in their efforts to be lean and efficient – a must for their successful future. At least when Brexit is resolved one way or another, we can all go back to blaming the weather for poor performances.”

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