The British people have voted to leave the European Union (EU), following a fierce and emotional campaign. Prime Minister, David Cameron, announced this morning he would step down by October and the pound slumped to a 30-year low. But how will this impact the retail industry?

There are huge consequences and changes following the vote, but the initial takeaway from the referendum result is uncertainty.

A number of retailers told Essential Retail in the run up to the vote that they were concerned about the uncertainty of leaving the EU: Jim Buckle, COO, FeelUnique; Tony Page, CEO, The Original Factory Shop; Gracia Amico, CEO of Pets Pyjamas and Andrew Robb, COO, Farfetch, to name a few.

This morning, Patrick O’Brien, content director at Verdict Retail, warned retailers need to prepare for a period of high volatility.

"Consumer confidence will be very fragile during a prolonged period of political instability. With import costs rising with the fall in the value of the pound, prices will rise, and many people will put off big ticket purchases until they have more confidence in their own personal economic prospects. Heavy share price falls at housebuilders point to market concerns over housing price falls and a slowing number of transactions, which will lead to a contraction of sales at home related retailers.”

Mark Woodhams, MD of NetSuite EMEA said retailers need to plan for flexilbility and change. "Hence our customers will be well-prepared to ride out what Brexit will bring," he said. "We see a strong and growing demand for cloud ERP as a result of this and, as the largest in the market, expect it to be a positive thing for our customers and our own business.”

Meanwhile, Richard Lim, CEO of Retail Economics said: "In the wake of Brexit the world has become a much more uncertain place with the immediate future likely to be plagued by volatility and fear. As households digest the implications, initial concerns will be centred on the strength of the economy, job security and political instability which will choke consumer confidence."

Impact on the economy

Along with the decision to leave the EU, the UK also woke up to a plunge in the UK stock market, where the pound sat at a new low not seen since 1985.

Lim said this 30-year low is likely to reflect an interest rate cut being priced in to markets. "A weaker pound will put intense pressure on import costs with shoppers likely to see the initial impact in the way of higher food prices given shorter supply chains," he said. "Economic data on spending, jobs and confidence will be under close scrutiny as repercussions unfold in the coming weeks."

Eamon Fitzgerald, managing director, Naked Wines, said a few weeks ago that currency will probably be a short-term issue. "And if they introduce tariffs on wine imported from the EU, well, we already pay tariffs on wine from outside the EU, so we'll take the hit – if it happens it happens, we can't really control it. The main thing is if it happens we will continue giving our customers the best prices and the best wines and don't let anything else external get in the way of that."

Meanwhile, Maureen Hinton, global research director at Verdict Retail, said: "For retailers the immediate issue is the fall in the pound and whether it will remain weak for a sustained period. This will impact costs as most buying is done in US$ and will push up prices – however it is a benefit for those selling internationally as it makes UK goods more competitively priced."

The Digital Single Market

It is also unclear – and unlikely – that the UK will continue to benefit from the Digital Single Market.

The Digital Single Market is estimated to add £375 billion per year to the EU economy and addresses many concepts of online trading including standardising VAT, data roaming, geoblocking and digital borders, copyright and intellectual property. Many strands of legislation are currently making their cumbersome journey through the European Parliament process and claim to make it easier for businesses to digital trade across European borders.

Justin Opie, MD, IMRG, said while the impact of Brexit is difficult to quantify, one obvious area which needs to be addressed is cross-border trading regulations, which are currently covered by EU legislation such as the consumer rights directive and data protection directive.

"The fact is Brexit may have a deep impact for online retailers or it may end up just seeming like business as usual, with a few minor tweaks," he said. "The uncertainty generated has obviously led to sharp fluctuations in economic measures such as the currency, but again how short- or long-term these impacts will be remains to be seen. The most important thing now is that we accept the result, like it or not, and start debating how industry can move forward successfully within this new reality in a pragmatic way."

Essential Retail spoke to Vicky Ford, Conservative MEP chairing the Internal Market and Consumer Protection Committee, in the run up to the referendum. She said: "Our consumers are increasingly buying internationally so we need to make sure our businesses can sell internationally and our consumers have the confidence to buy internationally."

She used the example of mobile data roaming charges, which were finally abolished in October, with charges to be completely removed by June 2017. Ford points to Switzerland who will not be able to “roam like at home” as the legislation only covers the 28 member states.

“I've sat at the table and seen them discuss all day about these issues, and I've seen Norway and Switzerland get a seat at the table, but they have no voice and no vote, so they have to accept all these rules,” she said.

“The Out Campaign would say 'don't worry, we'll negotiate another deal'; what they don't point out is that any new deal needs to be agreed by all 27 other countries around the table.”

The Vote Leave campaign did indeed argue the digital economy is not constrained by national boundaries.

"The UK attracts business from the west coast of America to the eastern shores of Asia," said a Vote Leave spokesperson last month. "Businesses will continue to trade with the UK regardless of our membership of the EU. There is a free trade zone running from Iceland to Turkey, and we will be part of that after we Vote Leave."

Meanwhile, Mark Lomas, chairman and partner at the law firm, Ashfords, commented this morning: "For UK policy and law makers the EU push towards the digital single market is considered vital to open up opportunities for our flourishing eCommerce sector.

"One would expect Westminster and Whitehall to find ways of embracing this pan-EU development, so as not to lose competitive advantage in the online world," he said. "The EU's General Data Protection Regulation would, (had we remained) have been directly applicable in all Member States without the need for implementing national legislation. Policy makers will need to decide whether they want to echo or mirror these changes on mainland Europe or whether there is some alternative path to follow. The Brexit decision will create short and medium term uncertainty not just in financial markets, but also for law makers and companies trying to make medium and long term decisions for their businesses. "

International courier, ParcelHero, called for the UK government to negotiate immediately for access to the single market.

ParcelHero’s head of consumer research David Jinks MILT, said: "Many of ParcelHero’s SME business customers voted for Brexit and we understand entirely why they have done so. However, we are concerned for our customers about the possibility of increased costs in sending parcels to the EU and also receiving items from the Union.’

ParcelHero ships to European countries not in the EU, including Switzerland, Norway and Iceland. "Parcels sent to these countries face customs delays, red tape and tariffs of between 5-9% on average," said Jinks. "We hope that the UK will not find itself with similar customs charges and paperwork. It is our hope that negotiations between the UK Government and Brussels will ensure that the EU will not impose new tariffs on British good shipped into the EU; and that similarly the UK Government will not seek to impose tit-for-tat tariffs in return."

He concluded: "ParcelHero does not foresee any price rises for its popular EU services while the UK’s future relationship is hammered out; and it will seek to protect its customers from any increased costs in the long term. It’s very much business as usual and we trust that Britain will not face new trade tariffs and border delays following these negotiations; which would be very much against the interest of EU countries and businesses; as well as UK SMEs."

To read Essential Retail's analysis on the effect of Brexit on eCommerce, click here.

To read a round-up of the thoughts of the retail industry, click here.