Published on October 10, 2016

Brexit strategy: focus on consumers and avoid high tariffs is the BRC’s advice

brexit GBPThe British Retail Consortium (BRC) have added their voices to the Confederation of British Industry (CBI), and the manufacturers’ organisation EEF, in urging Theresa May’s government to preserve barrier-free trade with Europe and avoid a “hard” Brexit.

In a letter to the Secretary of State for International Trade Liam Fox, the BRC called on the government to make keeping prices low a priority, and warned of higher prices in UK shops should the government default to World Trade Organization (WTO) rules. Such a move would mean widespread higher tariffs on the high street they said, with examples such as 14% on Chilean wines, 27% on meat and 11-16% on clothing and footwear. While the BRC accepted that some products may become cheaper, they said prices would rise overall, and shopkeepers would struggle to absorb costs.

If retailers are forced to pass high tariff costs on to consumers, it will lead to higher shop prices, which is likely to have a knock on effect on consumer spending.

Leading food retail stock performance
Leading UK retailer Tesco (TSCO) have ridden the rise in the FTSE, and climbed from 160p in mid-September to over 200p. This was helped by the recent first half results, which, while not spectacular, included more ambitious margin targets. J Sainsbury (SBRY) meanwhile, have seen a sharp fall in recent days, to 233p.

GBP fall hitting imports

Goods imported to the UK have already been affected by the fall in the value of the pound since the referendum. The pound recently fell to its lowest point against the dollar for thirty-one years and is at five year lows against the euro.

According to the BRC, “recent devaluation of the pound in relation to our most important trading currencies is compounding economic headwinds, while years of deflation have left little margin to absorb added cost from import tariffs and administrative burdens”.

BRC chairman Richard Baker said it was important to achieve trading arrangements with the rest of the world that do not put household budgets at risk. New trading partnerships with countries such as Australia could help reduce existing barriers to trade.

The BRC also said they would campaign with other groups for an end to the uncertainty facing the UK’s EU workers, between 100,000 and 200,000 of whom are employed in the retail industry.

Theresa May has said that article 50 will be triggered in the first quarter of 2017, meaning the formal Brexit negotiation process will begin by the end of March.

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