What Does Brexit have in Store for Consumer-Facing Industries?


    Consumer confidence has shaken to its minimum in the last five years due to the uncertainty created by Brexit. It has exposed shoppers to the risk of market instability in the months to come.

    The European Commission used the GfK index to capture consumer confidence falling as low as -14. A pilot sampling of consumers suggests that this fall is fuelled by the fear of the UK economy crisis post-Brexit, which will reinforce stringent measures to manage personal finances.

    The decline in confidence mirrored from the London retail chain’s sales report, which indicated underlying sales sliding as low as 2.6% every month. Britain is facing a fragile retail environment as profits go cynical beyond expectations.

    The Office for National Statistics recorded heavy discounting by online retailers on Cyber Mondays and Black Fridays to push sales of electronics marginally up. The surge in online spending relieved the City after a series of doom-laden reports by retailers.

    These reports clarify that both customers and businesses feel material impacts due to Brexit as a decline in consumer confidence weakens the demand generation.

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    Surveys indicated a significant drop in risk appetite is slowing down capital expenditure. The government assured its intentions to adopt a pro-business stance to counter any negative impact of Brexit.

    Till the outcome declaration, many businesses are reticent to invest significant time and resources in preparing for the fallout. Brexit will be beneficial for firms to climb up the curve if the trade links with the US, India, China and Brazil turn positive.

    The primary concern revolves around potential, trade barriers and increased bureaucracy, leading to supply chain inefficiency with increased export timelines.

    However, consumer product businesses are taking steps to mitigate this by managing supply chains proactively and introducing processes to manage supply chain disruption effectively.

    The cost of transporting goods from the UK for manufacture or distribution is also expected to increase exponentially, either as a result of tariffs, operational requirements, increased labour costs or currency fluctuations. Businesses need to assess the potential supply chain cost impact to strategize on how to effectively pass these costs on to the customers, or absorb the costs themselves.

    The UK exports to the EU could become significantly more expensive due to tariffs. Most of the UK’s largest retailers are inextricably linked to their CPG suppliers, suffering from increased supply chain operational costs.

    Retail businesses will also suffer from additional disruption due to changes in the existing customs duties and procedures. Retailers are exploring ways to reduce the impact of such disruption by creating customs warehouses, implementing special regimes and working with third-party fulfilment companies to reduce costs and lessen the administrative burden.

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    The single market will expose the UK automotive industry to high levels of risk, that has been critical to the competitiveness and success of the UK automotive sector by providing access to skilled labour, fostering innovation and R&D, and encouraging trade across the EU.

    Brexit will have a significant setback on the UK automotive sales, since over 50% of all UK, manufactured cars are exported to the EU market. Almost 80% of the total automotive imports in the UK is from the EU.

    The automotive industry operates complex supply chains that make use of the tariff-free movement of goods across EU borders. This sector is therefore under real threat of increased costs and disruption to their manufacturing process as delivery times across the supply chain are delayed due to the increased complexity of cross-border trade.

    In addition to the movement of goods, potential restrictions to the free movement of people in the EU is also likely to harm the customer-facing industries, creating a subsequent labour shortage.

    For many business leaders across the consumer-facing industries, workforce mobility is a key priority as they prepare for the UK’s departure from the EU. For the many UK businesses that rely on overseas workers, a future system that still enables access to both skilled and unskilled labour would be optimal.

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