Shops to suffer immediate shock in event of Brexit, report suggests
Retailers would be hit with a sharp economic shock leading to plunging sales if Britain votes to leave the European Union, a report has said.
Shops would see sales "flattening out" in 2016 before shrinking 3% the year after as the sector reels from a "damaging" blow caused by uncertainty over trade, according to The Economist Intelligence Unit (EIU).
The think-thank's study paints a bleak picture for retailers post-Brexit, with nominal sales set to be around 6% lower in 2020 than if Britain votes to remain in the EU.
It said that in the years after 2017 there would be a "muted recovery" while the terms of Brexit are ironed out, before sales "flatline again in 2019 when departure becomes a reality".
It added: "After this retail volumes in are expected resume a more stable growth trend by 2020, but the lost years will have set retail back."
The report, Out and Down: Mapping the impact of Brexit, said retailers would face a blow as consumers "retrench and consolidate income and expenditure" as they wait for the outcome of negotiations.
It also warned that retailers could risk becoming entangled in even more red tape if Britain heads for the European exit door.
It said the supply chains and agreements that evolved from EU membership would have to be revised while separate regulation overseeing safety, quality and consumer protection would also have to be drawn up.
"This will force retailers to consider two sets of rules when assessing their offering between the UK and Europe," the report added. "Rather than cutting red tape Brexit could make the situation even more complex for retailers seeking to offer comparable services across countries."
The study also pointed to the " competitive disadvantage" if the UK opts out of the Common Agricultural Policy, which could impact supply chains for British farmers.
Online retailers could also suffer from poorer access to the single digital economy, which aims to move 28 national digital markets into a single market for the EU, the report said.
"All of these will add to the cost and complexity of doing business which will either be passed onto consumers or borne by retailers who may have to shed jobs or fall victim themselves," it added.
However, it said there were "some silver linings" of a Brexit vote, as the Government would switch to a pro-Leave cabinet and roll out "business and investment-friendly policies" to help retailers.
The report is the latest intervention in the EU debate to come from the perspective of the retail sector after a group of former high street heavyweights said millions of families would suffer from rocketing food prices if Britain voted to leave the EU.
Ex retail chiefs - including Sir Terry Leahy of Tesco, Marc Bolland of Marks & Spencer, Justin King of Sainsbury's and Sir Ian Cheshire of B&Q owner Kingfisher - penned a letter in May warning that Brexit would be "catastrophic".