Retailers react to Brexit results and David Cameron resignation

24th Jun 2016

Photo credit: My-Retail Media

What a difference a day makes.

Britain fell from stable equilibrium into a state of chaos this morning. As news of a vote for the UK to leave the EU broke, the pound rose and fell more than any other day in modern history.

While retailers open for business and prepare their statements, business leaders have already called for the government and Bank of England to take “immediate and unambiguous” action to shore up Britain’s economy.

Adam Marshall, acting director-general of the British Chambers of Commerce, said: “The health of the economy must be the number one priority – not the Westminster political postmortem.” However, following the news that David Cameron resigned, there might be more focus on Number 10 to come.

Other representatives of Britain’s biggest businesses said the government needed to guarantee that EU citizens have the right to remain in the UK.

Across the board, the majority of business leaders called for Britain to remain in the EU, with more than 1,000 chief executives signing a letter backing a “remain” vote just days before the referendum.

Marshall said: “In the wake of the electorate’s historic decision to leave the European Union, the immediate priorities for UK business are market stability and political clarity.

“Some businesspeople will be pleased with the result, and others resigned to it. Yet all companies will expect swift, decisive, and coordinated action from the government and the Bank of England to stabilise markets if trading conditions or the availability of capital change dramatically.

“Firms across the UK want an immediate and unambiguous statement from the prime minister on next steps, along with a clear timeline for the UK’s exit from the European Union.

“Business will also want to see a detailed plan to support the economy during the coming transition period – as confidence, investment, hiring and growth would all be deeply affected by a prolonged period of uncertainty. If ever there were a time to ditch the straitjacket of fiscal rules for investment in a better business infrastructure, this is it.”

The Institute of Directors said businesses face a “nervy time” over the next few weeks and months.

Simon Walker, its director general, said: “The weeks and months ahead are going to be a nervy time for business leaders, so they need to know that the government is focused on maintaining stability while a new relationship with the EU is established.

“British businesses are resilient and, with their characteristic ingenuity, they will weather this storm. It is now beholden on politicians to negotiate a deal with European leaders which preserves the ability of British firms to trade easily with the remaining member states.”

Walker said that despite the vote, the EU will remain as Britain’s biggest trading partner.
He added: “One thing the government must do immediately is to guarantee the right to remain of EU citizens currently in the UK. Companies do not want to have to worry about losing valued staff.”

Earlier in the week, former chief executives of Tesco, Sainsbury’s, Asda, Morrisons, M&S and B&Q warned that the price of everyday essentials such as food, drink and clothing would rise if the UK votes to leave the EU.

The ex-chief executives, who previously ran Tesco, Sainsbury's, Asda, Morrisons, M&S and B&Q, said a drop in the pound coupled with supply chain disruption would cause prices to spike.

The average household could be £580 a year worse off as a result, retail union USDAW has predicted.

Back in the city, attention also turned to the smaller businesses likely to suffer from the fallout of the result. Stephen Roper, director of the Enterprise Research Centre thinktank, said: “Small businesses need to prepare for a period of volatility as markets react. Gains in terms of reduced regulation and EU membership costs may follow, but are probably some years off.

“The gains for small firms from Brexit are probably two to five years away. There is potential for reduced regulation and new trade deals, but the timing and effects of both remain uncertain. Outside the EU the UK will also be free of EU competition and state aid rules, allowing the UK government to provide more direct support to SMEs.”

Carolyn Fairbairn, director general of the CBI, the UK’s leading employers’ organisation, said the “urgent priority” was to reassure the market.

She said: “Many businesses will be concerned and need time to assess the implications. But they are used to dealing with challenge and change and we should be confident they will adapt.

“The urgent priority now is to reassure the markets. We need strong and calm leadership from the government, working with the Bank of England, to shore up confidence and stability in the economy.

“The choices we make over the coming months will affect generations to come. This is not a time for rushed decisions.

“The CBI will be consulting its members and business is committed to working with the government to shape the best possible conditions for future prosperity.”

Finally, the British Retail Consortium called for certainty in a time of upheaval. Chief executive of the BRC, Helen Dickinson, said on Friday morning:

“Now that a decision has been made to leave, it is important the Government moves quickly to explain the process of disengagement from the EU. Without clarity, retailers, other businesses and hence the economy will suffer from a prolonged period of uncertainty.

"We are already seeing the commencement of a period of considerable volatility as financial markets react to any emerging information that might indicate how the new relationship to the EU might be shaped. Retailers should be prepared for the possibility of significant swings, particularly in the exchange rate and consumer confidence.”

Ava Szajna

My Retail Media

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