Furniture Industry in the UK and Brexit-What Does it All Mean?
One of the significant moments in the history of Britain was on 23rd June when the country voted to exit the European Union. From a 72.2 percent turnout at the ballot, those who choose to leave were 51.9 percent. It was an outcome most pundits didn't expect to happen and the repercussions were almost immediate. The pound was hard hit and fell considerably as the stock market saw billions simply being wiped off. Even the Prime Minister could not believe the new normal and what had happened and choose to resign. With a nation in confusion and government divided, Brexit continued to draw a lot of attention across Britain and across the world.
It's over a month since the penultimate vote and uncertainty still looms. Of course the road to real European exit is not instant; the official process of separating European Union and UK has to be started by the Conservative Party in power. Conservatives have chosen Theresa May as the Prime Minister of Britain replacing David Cameron. The new PM has the tough job of leading the country out of the EU. With the new government in place, the official exit mechanism should start by September with the real exit process expected to take a minimum of 24 months. Currently, the nation remains uncertain with reports of a harder economy in coming months and a life without the cover of the Union.
Across the divide, opinions are divided on the how the economy and doing business will be affected by the referendum with lots of concerns raised.
Polls had been talking about the referendum before the vote was cast painting a rather divided picture of what the future looked like for every Briton. Consumer confidence has somehow been hard hit due to the ranging pessimism about the economic situation in the nation. In fact, immediately after the vote, consumer confidence dwindled sharply since 1994 when the records started being kept.
Those pro Brexit were very optimistic with results mixed across age groups and regions. The general expectation was that 60 percent of people expect the economy to do worse in the next one year, which was just 46 percent before the vote in June. Optimists expecting the economy to do well were only 20 percent against 27 percent before the vote. People who expect the cost of products to go up in the next one year were just 13 percent before the referendum but rose to 33 percent after the vote.
Analysis of consumer spending indicates that after Brexit success on the ballot such sectors such as grocery, Do It Yourself’s, living, and home, fashion, lifestyle and travel are most vulnerable to reduced spending by consumers who are wary of the future. History suggests that in times of serious uncertainty buyers only turn to brands they know very well, trust and love purchasing due to guarantees of monetary value and quality. Analysts suggest that this the time when companies will benefit if they came out strongly to respond to the concerns raised by consumers to meet their various changing needs and anticipating them.
Government has the main role of bolstering consumer confidence within this short period of high uncertainty by ensuring predictable timelines have been put in place and following them closely. Changes in interest rate was seen as a major effect that could spell doom or boost consumer confidence and the Bank of England was seen as wary of a growing recession. As a result, the Bank of England has already cut interests in a move expected to avoid a recession.
After cutting the borrowing costs, the UK Central Bank also solidified its QE Scheme as well as committing an additional £100 billion in a move that would be encouraging banks to keep lending. The interest rates were cut from 0.5 percent to 0.25 percent, the first of its kind since 2009.
Perhaps the move by the Bank of England was made to try and ensure the British housing market is not dampened further; it could have appreciated in a way in the ever changing London market while weakening retail sector prospects right from housewares, hardware, and furniture to carpets.
As such, retailers are not expected to hike prices at this uncertain time. Not many known how long the retail sector can withstand the current pressure after enduring three hard months of serious Brexit campaigns. Retailers are expected to work really hard to maintain low costs and delivering the best selections and options for consumers. Perhaps, by ensuring there's no additional cost or just minimal increase in the cost of goods entering the UK from Europe.
Not all gloom and doom for furniture sellers
Some of the top proponents of EU exit were the leadership of both Manchester Furniture Show and January Furniture Show. According to them, the global outlook of the UK furniture industry, the solid base of UK manufacturing and diverse suppliers from around the world means that the industry will not be affected by EU exit as many expected since it's not dependent only on the EU block for trade. Once the pound is re-based, UK furniture manufacturers have the potential of being competitive more than ever before on the international stage.