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Brexit - the opportunities and challenges facing retailers (practical steps you should be taking now)

12 July 2016
Retailers already reeling from the effects of the National Living Wage, gender pay gap reporting and with huge rises in business rates on the horizon are now facing radical uncertainty as a result of the UK's decision to leave the EU. Although nothing has changed legally - for now - the UK remains a member of the EU and subject to EU law, everything has changed from a business perspective. Lack of consumer confidence, rising sourcing costs and unsettled EU workers are only some of the challenges retailers are facing. With the failure already this year of BHS and Austin Reed there will be concerns of further retail insolvencies. However, the flip side of the coin is that challenges can also present opportunities. A weak GBP gives greater spending power to tourists and a summer tourism boom is already being predicted. Retailers who can find a way to navigate currency issues and control their costs will be attractive to non-UK based consumers. Pure player retailers in particular will benefit from this. 

So whilst it is impossible for anyone to predict what the future will look like, retailers need to have contingency plans in place to cater for the range of political solutions currently being discussed. It is being reported that in some sectors as many as 80% of businesses did not have a post-Brexit contingency plan so this will now need to be a key priority. We have put together a list practical steps retailers should be taking now as part of their contingency planning process. 

Currency fluctuations

Increases to sourcing costs are inevitable so the key question is the extent to which those increases can be delayed. Retailers should be looking at all of their supply arrangements. Are they fixed term or order by order? If fixed term, do the contracts include pricing increase mechanisms linked to currency fluctuations or increased costs? If not, the supplier may not be able to pass on increases before the end of the fixed term. However, many supply contracts are informal, resting on correspondence (often by email where terminology is not very precise) and incorporating the supplier's standard terms and conditions. It is sensible to look at all of the correspondence - not just the terms and conditions - for pricing terms which may assist. 

Retailers also need to check early termination and force majeure clauses to see whether their suppliers may be able to use currency fluctuations as a means to exit potentially uneconomic long term arrangements. 

Read Joe O’Callaghan’s key points to consider for commercial contracts.

Cost control

More than ever it will be necessary for retailers to control costs. A large part of these costs will be attributable to bricks and mortar stores. Retailers should be reviewing their lease break and termination dates. With enough time to negotiate before the break/termination date, it may be possible to secure rent reductions and more favourable terms generally. 
Are there grounds to appeal against business rate valuations? Taking advice from an expert ratings surveyor could prove to be money well spent. 

Your employees

In the short term nothing will change regarding EU staff’s right to continue to live and work within the UK.

Longer term, the impact upon EU staff will depend upon what terms are agreed regarding the UK’s departure from the EU. A condition of access to the single market could be the continuation of the right to freedom of movement for EU workers. However, given the immigration reduction promises made during the referendum campaign, there is likely to be considerable political pressure to reject this. If this transpires, one option may be an extension of the sponsorship licence programme currently applicable to non-EU nationals. This would see a considerable reduction in the numbers of less-skilled EU workers who would be entitled to work in the UK, although there may be certain exceptions made for those already in post.
Many retailers - particularly those in London - depend heavily on non-EU employees who may decide to leave now as a result of uncertainty over their future. It may not be advisable to adopt a 'wait and see' approach, leaving it to the individuals themselves. HR teams should be reviewing the status of their workforce to see whether independently of EU rights, employees have a right to remain in the UK. Individuals who have lived and worked in the UK for five years or more (or who will have reached this threshold by the date of the UK’s departure from the EU), may apply for permanent residence to allow them to remain in the UK. Others may have rights to nationality through relatives. 
In addition, given the recent increased reporting of alleged xenophobic and racist behaviour retailers are advised to take positive and practical steps to remind all staff of the importance of complying with equality and diversity policies and that conduct, in breach of such policies, will be treated seriously.

Read Sarah’Hooton’s full article on Brexit and the potential implications for UK employment law.

Supply chains

Whatever the arrangements post Brexit it seems likely that it will take longer and be more costly to move goods in and out of the U.K. Now is not the time for 'knee-jerk' reactions, but retailers should be reviewing their supply chains - both their infrastructure and their suppliers - to ensure not only that they are sufficiently robust to withstand the challenges, but also offer sufficient flexibility to adapt to the changing environment. 
Current thinking is that one of the likely consequences of Brexit is less choice as there will be fewer new ventures and non UK based operators may refocus their businesses elsewhere. Now more than ever before, customers and suppliers will need to develop true partnerships. It should be a matter of course to understand your partners' post Brexit plans. 

Amongst all of this, apparel retailers have to cope with the vagaries of the British weather and few retailers can fully follow the model adopted by some luxury brands allowing customers to buy now what they see on the catwalk. Post-Brexit it may seem counter-intuitive to speed up investment in smart supply chain technology, but an ability to reduce supply chain cycles and better predict what customers want will be critical in an uncertain environment. RFID technology is likely to assist, but data protection issues need to be adequately assessed well in advance of implementation.


Data - 'big' or 'small' is going to be vital in helping retailers manage post Brexit challenges, but data protection laws throughout the EU are facing a radical shake up with the General Data Protection Regulation (GDPR) which is expected to come into force in EU member states on 25 May 2018. Before the referendum many retailers were concerned that they would not be able to make the necessary changes to their systems in time. However, Brexit will not necessarily allow a sigh of relief. The 'long arm' effect of the GDPR means the Regulation will expressly apply to any UK business which offers goods or services to individuals in the EU or which monitors individuals in the EU. 

Read our full article from data protection expert Mark Gleeson.


Finally, in times of uncertainty, customers are more likely to change their minds about purchases and to demand refunds and compensation for allegedly defective products. Retailers can expect to see a rise in consumer claims, referrals to The Retail Ombudsman and complaints to Trading Standards. A survey undertaken earlier this year revealed that the websites of many retailers were not compliant with the Consumer Rights Act (CRA) leading to potentially damaging adverse publicity for the brands concerned. Retailers should ensure that their websites, signage and store policies and procedures are compliant with the CRA and that their employees are aware of requirements particularly in relation to returns and defective goods. Caroline Green recently spoke at our in house lawyer forum event on how to make sure you are meeting your obligations under the Consumer Rights Act – click here to view.

And finally....

In the words of Richard Pennycook of the Co-Op, "We've been through a period of uncertainty and we now know the outcome. Now we need to get on and seize the opportunities

Brexit and beyond: navigating the challenges ahead

Our Brexit hub provides useful information on the key areas that are likely to be affected by Brexit, the priority issues for any business or organisation and practical guidance to help you navigate the challenges ahead.

Visit the Brexit hub >

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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