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Analysis

Brexit carries big price tag for UK retailers

by Bethany Morris | 26.02.2019

Many employers in the retail sector are growing concerned about how Brexit will hit their businesses – particularly if the UK crashes out of the EU without a deal.

The first issue will be recruiting staff. According to current immigration proposals, intended to be introduced even if the government’s deal is passed, the Tier 2 visa which is currently in place for non-EU nationals in the UK will also cover EU citizens working here after Brexit. This visa type offers skilled migrants residency for two years if they earn a minimum of £30,000 per year.

An estimated 170,000 EU migrants are currently employed in the retail sector, according to the CBI. Considering the levels of pay typically earned in the industry, it is unlikely that these workers will meet the eligibility criteria, leaving a gaping hole in the center of the workforce which could prove difficult to replenish with UK-born staff.

An extra layer of complexity is added by the need for employers to get a Sponsor Licence to employ EU workers, which involves a costly application process.

The next challenge will be rising prices. Around 41% of the UK’s food imports came from the EU in 2017. After a no-deal Brexit, the price of these imports will increase substantially, particularly if Jeremy Hunt’s predictions of a devaluation in the pound occur. The meat and dairy industry could see the implementation of an 80% tariff, costing UK businesses an extra £6 billion, according to Retail Economics. This would significantly push up prices in shops.

The devaluation of sterling partnered with the end to free movement could also see UK farmers struggling to attract seasonal EU labour, putting further strain on the industry. A weaker currency and economy will be less appealing to those considering a move to the UK.

During September and October 2018, sales in the retail industry fell by 0.5%. This downturn is expected to grow and, according to the Independent, can in part be attributed to a decline in consumer confidence as the uncertainty around Brexit and the economy continues to heighten. This increase in consumer doubt is spreading, with knock-on effects throughout the sector beginning to ripple.

Online consumer giants such as Amazon have also played a role, as consumers continue to turn to online outlets to spend their earnings. If this trend continues, HGV and delivery drivers will be of increased demand. A combination of drivers edging closer to retirement age, tighter controls over the entry of unskilled migrants, and expected delays and red tape at borders, could see the haulage sector struggle to find the necessary workforce. That’s bad news for both digital and high street retailers.

Brexit, and especially a crash-out no-deal exit, will hit UK retailers on many fronts. We’ve already seen big manufacturers starting to move operations abroad. Retailers, especially those on the high street, often don’t have that choice available to them. Brexit could hollow out a once proud sector, at huge cost to British jobs and businesses.

Bethany Morris is a content writer for the Immigration Advice Service.

Edited by Luke Lythgoe

2 Responses to “Brexit carries big price tag for UK retailers”

  • You van see those little beaks growl “project fear”. If there still is a one percent majority for Brexit just let the critters experience what they’re doing to themselves!

  • How about doing away with vat on all foodstuffs?

    This would make imported foods less expensive but the exchequer would still get the tariffs put on imports. This would then make home grown food more competitive and hopefully more widely purchased. Bonnet da deuche Rodney!