Britain’s vote to leave the European Union has the UK in a state of shock and retailers must be prepared to deal with a high level of volatility across supply chain costs and consumer confidence, according to retail analyst firm Verdict Retail.
“Consumer confidence will be very fragile during a prolonged period of political instability, as the timetable for the exit from the EU is clarified, and the fall out in the main political parties comes to a head, with the possibility of a general election also looming,” said Maureen Hinton, global research director at Verdict Retail.
Hinton said consumers wariness of making big financial commitments, including buying houses until they have more confidence in their own personal economic prospects, will hit the sale of big ticket items in consumers discretionary spending.
“Heavy share price falls at housebuilders already point to market concerns over house price falls and a slowdown in the number of transactions, which would lead to a contraction of sales at home related retailers,” she said.
Hinton said the pound’s sharp drop, with fears that it will weaken further, will increase costs to retailers of importing goods.
“Following the exit from the single market, there could be costly tariffs in place should the UK government fail to negotiate beneficial trade agreements, which will put further upward pressure on prices,” Hinton said.
Following the confirmation that Britain will exit the EU, online fashion retailer, Asos’s website in the UK collapsed, with consumers flocking to the Asos website to take advantage of the historically low Pound.
Gold dealers in London reported surging demand for coins and bars among retail investors on Friday, with some saying stocks were tight.
Britain’s vote to leave the European Union forced the resignation of Prime Minister David Cameron and dealt the biggest blow to the European project of greater unity since World War II.
Global stock markets lost about $US2 trillion in value while sterling suffered a record one-day plunge to a 31-year low.
The single currency was under pressure as investors worried that the Brexit vote could encourage similar movements in other European countries.
US short-term interest rates futures hit contract highs in early US trading, boosting expectations the Federal Reserve may cut interest rates to help shield the economy from any global fallout.
“This isn’t necessarily about Britain, it’s about uncertainty in the world’s largest economy,” Amanda van Dyke, fund manager at Peterhouse Asset Management, said.
“The general commentators are suggesting that the Fed is no longer going to raise rates because the (US) dollar is soaring, and they can no longer afford for the dollar to keep going as fast as it is.”
Silver rose 2.65 per cent to $US17.73 an ounce, while platinum lifted 1.83 per cent to $US977.60. Palladium, the most industrial of the major precious metals, bucked the trend to fall 2.80 per cent to $US548.20 an ounce.
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