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Britain's Brexit Backing- How will it impact the FMCG sector?

06 December 2018

It seems so long ago that the British population infamously voted to leave the European Union.  David Cameron’s decision to hold a referendum ultimately cost him his role as Prime Minister, and led to the UK’s historical decision to leave the EU. On Thursday 23th of June 2016, the UK made a life-changing decision that would alter the certainty of the UK for good.

In total, 51.9% of votes in favour of exiting the European Union and the immediate effects of this referendum are already notable. But two years down the line the long-term impact of the Brexit vote is still unknown. The weakening of the British pound is perhaps the first tangible impact of the Brexit vote. The state of political instability that followed is another highly noticeable impact of the Brexit vote. 

When it comes to the FMGC world, how exactly has our decision to leave the EU affected the FMCG landscape up to this point? And more importantly, how do we predict how the FMCG world will be altered when the UK finalises the Brexit deal? 

The wider impact of Brexit is at this point widely unknown, as is the impact of Brexit on the FMCG sector specifically. Whilst Prime Minister Theresa May hopes to negotiate an exit bill that is favourable to the UK, this ‘Soft Brexit’ deal is by no means nailed on. A ‘Hard Brexit’ is perhaps more expected and would see the UK leave the EU trade market without a trade deal. This would impact UK trade tariffs, law, and migration across Europe. 

It seems that changes to tax, trade and customs duties are pretty much a given. Britain currently bases UK VAT laws on guidance from the European Court of Justice. As Britain exits the EU VAT laws will no longer have to adhere to the Court of Justice enabling the government to change VAT laws to however they see fit. However… the government seems to have no intention of doing so indicating that VAT is perhaps unlikely to change as a result of Brexit.

Trade is perhaps the most anticipated element of the Brexit negotiations, and us Brits are long awaiting the announcement of some form of trade deal… if any. As it currently stands, the UK is a member of the European internal market. This gives us access to the movement of goods, services, labour and capital at no cost, as well as certain trading aspects to the other 50 countries the EU has some form of trading agreement with. The completion of Brexit could potentially be detrimental to the cost of imports and exports and the knock-on effects of this are numerous. If May fails to negotiate a trade deal with the EU, then the UK will revert back to being a member of the World Trade Organisation and will instead have to operate under their laws in terms of tax and duties. 

The impact of Brexit on migration and employment is also a long awaited phenomenon. The UK will be exempt from EU migration and employment laws but May has announced that existing workers’ rights will be guaranteed with the ‘Great Repeal Bill’ in 2017. The Government plans to replicate any existing EU rights to ensure paid holiday and maternity/paternity rights, to name just a couple. The ‘Great Repeal Bill’ will ultimately duplicate all existing EU protections so it would appear that the UK will be no worse off in this respect, post-Brexit. 

Whilst freedom of movement is a highly fragile topic of discussion, the restriction to movement as a result of Brexit will without doubt have huge implications on the FMCG sector. Not only will it impact the availability of labour, it will severely impact the availability of trained and talented individuals from abroad. A great deal of UK FMCG business is heavily reliant on seasonal workers further highlighting the significant impact of the effect of Brexit on the FMCG sector in terms of staff availability. 

If anything, the long-term impact of Brexit is at this point unclear. As the implications of the Brexit vote on the FMCG sector are already noticable, they will gain more clarity as May continues and finalises negotiations with the EU. Be it ‘Soft Brexit’, ‘Hard Brexit’, or somewhere in the middle… the long-term impact of Brexit on the FMCG stage will certainly be interesting. 

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