Chief Executive's Blog: What Impact Brexit will have on the Convenience Sector

What does today’s speech by Theresa May, outlining the UK’s approach to Brexit, mean for the convenience store sector?  The markets appear to have responded positively, I expect because they now have a bit more certainty (or at least some sort of clue) about what the UK’s future relationship with Europe might look like.  Is our sector similarly encouraged?

Like every other sector of business, convenience stores will be impacted by the UK leaving the EU.  I’m always a bit careful about portraying direct causes and effects as a result of this decision.  In reality, most of these impacts will be secondary, and come in the form of changes to cost prices due to currency changes or tariffs, the tightening of the labour market if we see more controls on immigration, or decisions on regulation passed only by the UK parliament rather than beginning as an EU directive.  Alongside all of these potential changes, consumers are changing their lifestyles and shopping habits, and technological changes move ever faster, so delineating a “Brexit effect” for our sector is hard.

You will all have your own opinions about Brexit – our pre-referendum polling showed our sector to be split between remainers and Brexiters, with plenty undecided or unwilling to reveal their voting intention - and on what settlement we should reach for our economy and society post-2019.  We do know that since the referendum, convenience retailers who are concerned at the negative impact of Brexit on their business out-number those who think it will have a positive impact by about two to one.  Let’s see if the Prime Minister’s speech allays those fears, or makes the majority of retailers who are still unsure about Brexit’s impact any clearer in their views.

So here is what I think convenience retailers should be looking out for in the Brexit negotiations:

  1. What tariffs are businesses likely to pay to import product?  In most cases, convenience stores are doing this through wholesalers who may themselves use importers of others to source these products.  However many links in the chain, the level of tariff with the EU and other countries will directly affect the price that retailers pay for the product, which in turn affects their selling price and / or their margin.  As direct or indirect importers, we should be arguing against a high tariff settlement, which some UK manufacturers have been pressing for.
  2. Who will be allowed to live and work in the UK, and on what terms?  We are currently conducting a survey of people working in convenience stores, so I reserve judgement until I see the those results, but my perception would be that non-UK EU citizens make up a pretty small proportion of our sector’s workforce.  However, they make up a larger proportion of the food manufacturing, wholesale and distribution workforce.  Restrictions on immigration from the EU could restrict the labour market from which manufacturers wholesalers and retailers recruit, and thus force up the cost of labour and even lead to labour shortages.  These costs would be passed down to convenience retailers, and we should be trying to ensure that UK employers can access labour from the EU.
  3. How will the UK government regulate our sector, and what formal or informal role will the EU have in this?  A clean break from the EU would on the face of it mean full decision-making autonomy returned to Westminster, but the Prime Minister has not ruled out participating in some EU programmes, and these could come with regulatory agreements.  I think it would be a mistake to regard UK policy-making as being immune from outside influence post-Brexit, as we have seen many policy initiatives picked up from outside the EU, as well as EU directives, impacting convenience stores in the UK. What’s more, many of the policies that have concerned convenience stores most in recent years have emanated from UK politicians, not those in Brussels or elsewhere.  Brexit won’t herald a bonfire of all the regulations we don’t like, but it is an opportunity to talk about the regulatory environment that will best support local shops.

We will keep working with the UK government, and at EU level, to put retailers’ voices into the debate, so we’re keen to hear from you.  For now, the best advice I could give is to continue to focus on your customers and your community, where you are more important than ever.

This entry was posted by Leah on Tue, 17/01/2017 - 16:00