Sectors & markets

A Brexit Deal for Retail

Josh Hardie, Deputy Director General of the CBI, explores how Brexit can deliver what the UK retail industry needs now

There is no other part of the economy that is at the front and centre of the public consciousness as much as the retail sector. Accounting for around 9 percent of jobs in the UK – from Christmas jobs on the high street to full-time management of retail distribution depots – nearly everyone has some experience working in, or with, the industry. It is also one of the economy’s most innovative sectors and is often at the vanguard of adopting disruptive technologies and business
models.

But despite these strengths, retail faces serious potential challenges with the UK’s departure from the EU. Retail is a key example of why it is important to get the right Brexit deal, in terms of immigration regulation, and customs. While things are moving in the right direction in the negotiations, this is the moment for businesses in the retail industry to make their priorities clear on both sides of the Channel.

Ensuring that retailers and their supply chains continue to have access to the right talent and workforce after Brexit is crucial for the sector. Beyond the shop floor, EU citizens work throughout the supply chain. From farm workers, to lorry drivers, to accountants, a significant part of the workforce that supports the industry are EU citizens. For it to thrive in the future, continued access to labour and skills form the EU is therefore absolutely vital.

Crucially, in the new economic relationship between the UK and EU, safeguarding frictionless trade is particularly important for retail. With retailers acting as the consumer facing outlet for many different sectors that sell into it, such as food and drink, goods constantly move around from supply chain to manufacturer to retailer at pace.

To protect the deeply interconnected supply chains of the retail industry, trade must be as easy and frictionless as possible or costs will inevitably be passed on to the consumer or simply transferred further up the supply chain.

From Camembert to Chianti, the EU is the largest and most important market both for the import and export of retail goods. Where the UK does not produce items itself, it heavily relies on imports - for example, 98 percent of UK demand for clothing is from the EU and the rest of the world.

For food retail, frictionless trade is especially important – the EU alone accounts for 29 percent of the food on the shelves in the UK. The solution to the Irish border question will also be particularly fundamental to the sector, as 41 percent of the Republic of Ireland’s food exports go to the UK, in trade worth €4.bn.

The UK regularly acts as a trade hub for non-EU imports to enter the EU. For example, one consumer goods CBI member manufactures all its clothing products in Asia then ships them to hubs in the North East of England and from there, the company coordinates distribution across the UK, Ireland and Northern Europe.

One of the answers to achieving as frictionless trade as possible in a post-Brexit world is to have high regulatory convergence with the
EU. The CBI’s latest report Smooth Operations found that the vast majority of UK sectors are seeking a deep regulatory relationship
with the EU – including consumer goods and food.

A hard-headed look at the economic evidence shows that some form of customs union, alongside high regulatory alignment and a deep relationship with the single market, is necessary to ensure frictionless trade and no hardening of the Irish Border.

Business is 100 percent committed to making a success of Brexit. The next six months will be crucial in the negotiations and the experience of companies will be essential in the months ahead. The negotiators must listen to the evidence – and the CBI is working with them to secure the best possible outcome for both the UK and EU.

This article was originally published in INFO magazine, May/June 2018