It is not a result that many predicted – or that most fashion retailers wanted – but Britain has voted to leave the European Union. So what does it mean in practical terms for retailers?
Through comment from some of the country’s top analysts and experts, here are the top five things we know – and do not know – about Brexit so far.
1 We’re still in the EU
The die may be cast by the public vote, but the EU is not about to cast us out just yet. First David Cameron has to invoke Article 50 of the the Lisbon Treaty, which he is no under obligation to do straight away.
Assuming he does, which is by far the most likely outcome, European law states that the withdrawal process will take about two years. But even this is not set in stone, says Moody’s Investor Service Cross-Sector UK and EU Report, released today (June 24).
“This can be extended by mutual agreement. The broader process may take longer as both sides seek to mitigate the impact of Brexit,” the report reads.
“The UK government will have to consider material trade-offs between favourable access to the EU Single Market against concessions in the areas of regulation and immigration.”
With the immediate and dramatic impact on Sterling, dropping 10% and the FTSE100, down 8%, you’d be forgiven for thinking the UK is already alone, but until we finally leave the EU, retailers will still enjoy all of the benefits membership brings – including access to the single market, free movement of workers and no tariffs.
But of course retailers have no time to waste when it comes to putting plans in place for life outside the EU, as two years is a very short time in business.
2 Insolvency rates will increase
Insolvency rates are traditionally very closely linked to GDP. A report by trade credit insurance provider Atradius, predicts the economic shock of Brexit will cause the number of failing businesses to increase significantly from 2018 onwards.
It forecasts the rate of failure of British businesses will rise by 4 percentage points in the next two years, making it the fastest-growing in Europe, ahead of the Republic of Ireland, which will go up by 3.5 percentage points.
Alun Sweeney, country director for Atradius UK and Ireland, has urged retailers to ensure they are in a strong position to face the long-term challenges ahead.
“When the emotion of the result subsides, it is important to recognise that UK business will adapt and those with strong management, who execute a clear and well-funded strategy, will continue to thrive,” he said.
3 There will be a new employer rulebook
When we do leave, one of the biggest changes retailers will face is to the relationships with their employees.
One of the most frequently discussed aspects of EU law in the run-up to the referendum was the free movement of workers. Under EU law, workers from any EU state have the right to work in another without any cross-border restrictions.
We may not know what the new arrangement will be for some time. It is possible that we negotiate with the EU to retain free movement of workers – as a handful of non-EU countries including Switzerland have – but given the tone of the leave campaign this is unlikely.
What prominent leave politicians, especially Conservative MP Daniel Hannan, have tried to make clear today, is that arrangements will be put in place for existing EU workers to keep working here indefinitely. But this is not a guarantee.
Free movement is far from the only part of employment law enshrined in EU legislation. Working hours directives for maternity, paternity and more may be changed when we leave. This may turn out to be a double-edged sword for employers, believes Mark Quinn, head of Mercer’s talent business.
“UK companies will have to gear up for likely changes in UK employment and labour market regulation, and certain elements are likely to become more favourable to employers, although this may well create a more turbulent employee relations environment,” he said.
4 You may have to rethink your approach to European trade shows
Trade shows such as Pitti Uomo in Florence and Tranoi in Paris have become regular fixtures for many British suppliers, brands and buyers. But industry professionals may not appreciate the impact leaving will have on their ability both to travel to work in a European country (which may require a visa) and to take stock across borders.
Achilleas Constantinou, chief executive of women’s eveningwear brand and supplier Ariella, has lived through the era of pre-EU agreements and does not relish the prospect of going back.
“We’ve got sales agents now who can go over and sell in Milan as if it were Manchester, and we’re on the verge of throwing it all away. Leaving would destroy their careers,” he warns.
“I’m one of the few who remembers the bad old days. It was very arduous to box everything up and take it through customs. The preparation we had to put in to take our goods across the borders would take weeks. Can you really see people doing that now, or in fact people from Europe doing that to come over here? It’ll be incredibly damaging.”
5 So far we know very little
For everything we do know, the truth is there is a lot more that we don’t. Will trade tariffs be introduced for British companies looking to trade within the EU? Will we sign superior trade deals with the US and eastern powerhouses like China and India?
Unfortunately, we won’t know any of this until most likely near the end of our two-year withdrawal period. And this in itself is a massive problem as uncertainty – the word that has already haunted retailers for the last 18 months – prevails for at least another 24.
Belstaff CEO Gavin Haig concluded: “Nothing is proscribed with an exit from Europe, but we would expect it to add complexity and barriers to our business. [It won’t be] good for trade, employees or customers.”
Until the new trading apparatus, it will be a case of playing for survival, most agree.