The Brexit - What Retailers Should be Aware of

This article was published prior to the publication of the post-Brexit agreement between the UK and EU which covers the relationship between the UK and EU following the end of the implementation period (commonly referred to as the “transition period”) created by the European Union (Withdrawal Agreement) Act 2020, and should be read in that context. For up-to-date commentary and information on our services, please see our Beyond Brexit page.

It is now confirmed that a referendum will be held on 23 June to decide whether Britain will remain in the EU and both the yes and no campaigns start in earnest. Both campaigns will be working hard to persuade individuals and businesses alike as to the merits or otherwise, of Britain remaining in the EU and the substance of the amended deal David Cameron procured from the EU. 

Many of Britain's largest retailers have signed a unified letter of support for Britain to remain in the EU but to date, notably Tesco, Sainsbury's and Morrisons are withholding their signature. So what are the implications of a potential Brexit for retailers? The EU is pervasive in retailers everyday business and the issues of Britain's exit are wide ranging. We set out below just a few of the things retailers will need to consider:

  • Trade - It is of course the most obvious issue. Currently retailers are able to benefit from the single market with goods passing through members states as if they are one. If Britain leaves the EU new treaties will need to be negotiated which will inevitably take a significant period of time leaving retail businesses in a state of flux as to the way in which they conduct business with their customers and suppliers.
  • Contracts - The current EU laws applicable to contractual and non-contractual obligations are enshrined in the Rome I and Rome II Regulations. It is likely that if Rome I and II were no longer to apply, English courts would revert to applying the rules that were in force before the regulations were implemented. This will have an effect on existing and future contracts.
  • New treaties - There will be considerable uncertainty for retailers in relation to matters such as health and safety/product policies and tax and customs duties until new treaties are agreed with the EU.
  • The strength of sterling - The world markets have already seen the strength of the pound dip significantly since the announcement of the referendum. An exit from the EU is likely to fuel this decline as markets adjust to Britain being recast as an EU outsider. Whilst this may drive the demand for goods up, ultimately sales prices will be weaker and the cost of obtaining raw materials and components from the EU considerably more expensive.
  • Employment - Many businesses employ EU nationals who enjoy the right to work in Britain. The UK government will have to consider how it chooses to tackle the status of such employees if Britain is no longer part of the unified bloc.

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