Week Ahead (Feb 24-28): UK Retailers’ Hopes Rest On Clear Transition Path

Market participants in the week ahead will receive fresh gauges of UK consumer and business confidence, as uncertainties over Britain’s future relationship with the EU generally continue to pose challenges.

Conducting business in the UK remains contingent on a long list of material concerns, including the unfolding of Brexit and trade developments, as well as slowing global and regional growth.

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Although the recent victory of UK prime minister Boris Johnson and his Conservative Party in the general election had essentially led to the formal withdrawal of the nation from the EU at the end of January 2020, several hurdles remain unresolved, including establishing a free trade agreement with the bloc ahead of a year-end 2020 deadline.

Following the central bank’s monetary policy decision in January, Bank of England (BoE) governor Mark Carney said that in the period since the June 2016 referendum on Brexit, business investment has been “very weak,” going from “the strongest in the G7 to the weakest.”

Carney acknowledged that the weakness has not only involved capital investment but also process investment, where businesses in certain sectors over the past year have had to “devote a lot of time to contingency planning,” adding that “there’s only 24 hours in a day and the time they spend on that is not time spent on expanding.”

Against this backdrop, the UK retail sector, which already contends with an increasing drive away from physical stores and towards online marketing and sales, also grapples with considerable concerns about how the UK’s departure may reshape the industry’s operations – especially concerning supply chains and the adoption of new regulatory requirements.

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Fearing the deleterious effects on the UK retail sector from the Brexit transition period, Kyle Monk, head of retail insights and analytics at the British Retail Consortium (BRC), said that it is “essential progress is made quickly in the upcoming EU trade negotiations otherwise the UK risks squandering any boost to consumer confidence.

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The author does not hold any positions in the financial instruments referenced in the materials provided.

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