As the UK's retail sector continues to adapt to deal with the aftermath of the global COVID-19 crisis, it has another challenge on its hands with the prospect of a No Trade Deal Brexit at the end of the transition period.
If no trade deal is reached between the UK and the EU, any increased 'red tape' in the form of additional Customs and regulatory requirements will bring with it the prospect of significant processing delays for imports into the UK. Border controls will need to be factored in to supply chain planning: for a sector largely operating on 'just in time' regimes, even the smallest of delays will have significant implications. Further, unless a preferential trade deal can be agreed in accordance with WTO rules, the UK will be obliged to impose its new Global Tariff on all EU products (and vice-versa for the EU and its equivalent).
Recent Government announcements have suggested a phased introduction of border controls vis-à-vis imports from the EU. Initially controls will apply only to alcohol and tobacco. In April 2021, controls will apply to products of animal origin and from July 2021 to all products. Tariffs on goods imported prior to July 2021 will be payable, but on a postponed basis. The arrangements for imports to Northern Ireland remain unresolved and, as regards imports into the EU, there are currently no signs of a phased introduction of customs controls and tariffs.
Whilst the UK's imports from the EU are heavily weighted to food, all forms of retail need to consider the impact of a No Trade Deal Brexit including currency fluctuations, staff shortages, and potential regulatory divergence. Retail relies heavily on EU workers, and changes to the UK's immigration regime will impact heavily on the sector. Retailers with customers across Europe have adapted their processes to comply with the General Data Protection Regulation (GDPR) when processing customer data in the EU. Whilst the UK Government will, it has said, retain a UK version of GDPR, a UK business with customers in the EU will need to ensure that they are compliant with both data protection regimes, and will face regulatory oversight under both. They may also need to adopt new processes for transferring customer data from the EU to the UK.
Effective protection for intellectual property rights is vital across the industry. Positively, the UK and EU have reached agreement on preserving existing IP rights after the end of the transition period, with minimal burden on rights owners. The UK has also said that it will create a new right for unregistered designs to replicate the EU unregistered design regime, an extremely valuable right across many design-led industries such as fashion. This is a welcome step but, without reciprocity in relation to design protection between the UK and the EU, the new right may prove to be of limited value.
The retail industry is already transforming itself to survive. Quick to respond to, and predict, change, it will be watching the ongoing trade negotiations closely.