From immigration to data – the potential impact of a no-deal Brexit

There is now less than two months before Britain leaves the European Union, and the divide both within the main two parties and the country continues. Some are arguing the case for a second referendum on Britain’s membership, while others say the result of the first vote must be respected.

As the debate goes on, the clock keeps ticking. Britain currently has no idea what relationship it will have with the European Union after 29 March, despite the ongoing negotiations which have taken place for the last two years.

If we leave without a deal – and it’s looking more likely by the day – that would have a catastrophic impact on industries such as retail.

Why? Because it would seriously affect the industry’s ability to recruit staff and trade. There are 170,000 EU citizens working in retail, according to the CBI. That’s one in fifteen of the workforce. In the event of a no-deal Brexit, the government has announced that anyone wanting to come to the UK for longer than three months will have to apply for European Temporary Leave to Remain. It will mean they can work, study and live for three years from the date it is granted. After 2020, EU citizens will be subject to the same rules as non-EU citizens. This means if a British man wants to bring over his Dutch wife, then he will have to apply for a Spouse Visa just as non-EU citizens currently have to.

Aside from this, there’s also the issue of trade. A no-deal Brexit would see the UK revert to the World Trade Organisation’s Most Favoured Nation status. If it chooses to do this, it can decide how to set its tariff rates, but it will have to apply whatever it does for one country, to all countries. One option would be to put them at 0%, but this would have a catastrophic impact on the supply chain by flooding the UK with imports. And even if the other option is taken and tariffs are applied, the cost could still be huge – potentially as much as £8 billion.

So, in both scenarios the impact on trade will be damaging. That will also be the case online as the UK will cease to be a member of the European Digital Single Market (EDSM). The EDSM has worked to improve access to online services and reduce obstacles to cross-border e-commerce. It also helps to create the correct regulatory conditions for retailers so they can operate with their potentials maximised. Not being part of this threatens to create barriers to online trade. The European Commission has estimated the EDSM to be worth 500 billion euros, and could save EU citizens almost 12 billion euros each year in online shopping. But EU citizens may choose not to use UK retailers when we’re not part of the EDSM because we wouldn’t be legally aligned with the rest of the EU. Therefore, if an EU citizen buys a faulty product in their own city, for example, not being in the EDSM means they wouldn’t be able to challenge it through the courts in their own city. 

There’s another headache for retailers in that under the decision to leave they will be banned from using customer data from those who are in the EU. This will create problems from people who want to buy and retailers who want to sell. If later the UK decided it did want to be part of the EDSM, or wished to create a special agreement with the EU, it would have to conform to its consumer and data protection rules.

If goods are still sold, there could still be problems in the wider supply chain. Companies operating on ‘just in time’ models would be particularly affected. Technology wouldn’t really provide solutions for these retailers because each container will contain different products, and the make-up of each container will change depending on the day and even the hour.

Therefore, it’s clear the impact of a no-deal Brexit would be disastrous for retailers. Not only will it impact the ability to recruit staff and trade with other countries, but it will mean online retailers will suffer, as will the wider supply chain. It’s important MPs get behind initiatives in the House of Commons to ensure a no-deal Brexit does not happen. To not do so will prove devastating for the retail sector.

What’s Hot on Essential Retail?