Brexit – the transition period and its implications for retailers

The eleven month transition period for the EU and the UK to negotiate a trade deal will begin on 1 February 2020, and end on 31 December 2020. This will impact businesses in a number of ways, affecting supply chains, staffing, export and import tariffs and much else besides.

What is happening?

Prime Minister Johnson's Withdrawal Agreement Bill was brought before the Commons for its first, second and third readings on the 6, 7 and 8 January 2020 respectively.

Once the bill has passed through Parliament as expected, preparation for exit under the terms of the deal will begin in earnest.

Why does it matter?

The deal negotiated by Prime Minister Johnson has significant consequences for retailers. As the EU is our biggest trading partner, there will be no sector unaffected by the so-called “divorce”. If the Conservative government sticks to its manifesto pledges, it will not extend the transition period beyond the end of 2020, meaning it will have to strike a free-trade deal with the bloc within a year. The alternative would be leaving without a deal.  

Brexit will impact on businesses in a number of ways. When Johnson’s deal was first agreed, British manufacturers expressed their concern. Most of the criticism focussed on regulatory divergence between the UK and the EU making it more difficult for UK exporters. 

Brexit will also impact on the work force and the labour market in retail. According to FTI Consulting, the retail sector relies on a ‘300,000+ EU migrant workforce’.  Provisions relating to workers’ rights have been moved to the political declaration in Johnson’s deal, meaning the government is not bound by them. 

The rest of the Political Declaration has established a framework for the negotiation of a future Free Trade Agreement. In it, the EU and the UK ‘recognise that they have a particularly important trading and investment relationship’ and ‘agree to develop an ambitious, wide-ranging and balanced economic partnership’. However, the future trading relationship between the UK and the EU remains uncertain. 

The ambitions outlined in the Political Declaration are very much dependent on how deal negotiations progress, so businesses in general will need to remain attuned and responsive to developments.

What action should you take?

Although businesses will likely have been preparing for the last three and a half years for some form of Brexit, there is still uncertainty over an end state, so you should prepare for a range of outcomes to manage the risks as effectively as possible.  

If you would like any assistance, please contact Ciara Cullen or your usual RPC contact.