Warnings of a no-deal Brexit may send UK shoppers running scared
Retailers face tough times ahead as uncertainty reigns, though supermarkets could benefit from panic-buying
Troops on the street. Emergency measures to make sure food and medicines still get to the UK.
With less than 100 days until Britain leaves the EU and no certainty over what the departure will look like, the government has little choice but to implement contingency plans for a no-deal Brexit.
Consumers are already running scared of Britain crashing out of the EU without a deal. Profit warnings from Superdry, Bonmarche Holdings and most recently Asos have underlined just how difficult the market is for retailers. While the government needs to prepare for the worst, in doing so it risks panicking skittish consumers even more. And with the high street having suffered a bruising 2018, using a hard Brexit as a bargaining tool with Europe risks turning consumer-facing companies into collateral damage.
The cabinet has agreed to implement no-deal plans in full, and officials will release more information for citizens in the coming weeks. Some early reports aren’t good. The Sunday Times said they are exploring the idea of warning families not to book holidays past the March 29 Brexit date.
It’s not just shopping that is vulnerable to doom-mongering. A reluctance to schedule holidays after March would hit travel companies such as Thomas Cook, already reeling from this summer’s staycation trend, and rival TUI.
The next few days will be crucial for retailers. Even though the Office for National Statistics’s November sales report turned out to be much better than economists had forecast, many on the high street, including Sports Direct International founder Mike Ashley, say the month had been dismal.
There’s potential for some spending to be unleashed by shoppers who had held back in expectation that desperate discounting will produce even bigger savings right before the holiday. That might allow them to trade up, for example buying a better coat or beauty gift set than their budget would normally have allowed.
It will help that many Brits will be paid over the next few days. A continuation of the current crisp, dry, weather would give them more incentive to shop.
And it’s normally a good period for the travel industry. As soon as the festivities are over, there’s a switch from gift-buying to thoughts of warm-weather trips abroad. The peak period for bookings is from Boxing Day to around mid-February — the first Saturday in January is known as “Sunshine Saturday”.
But there won’t be much of a warm glow if officials’ warnings exacerbate shoppers’ caution.
There is one silver lining in all this. Food retailers get a boost when people stock up their cupboards in anticipation of an upcoming event, such as heavy snow. The ideal scenario is that a spell of Arctic weather is forecast, shoppers buy more, but the cold snap never arrives.
If a no-deal looks likely, but then there is a last-minute reprieve, then supermarkets would receive a sales lift without any of the nasty side effects.
But if a hard Brexit does emerge, causing havoc across supply chains, or if consumers are so freaked out by the reality of Brexit that they rein in spending even more, there could be far more pain to come.
• Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries.