The British exit from the European Union (EU) has caused severe changes to the prospects of the UK economy. Brexit is set to hit anyone with a connection to the UK. The high street is where people are definitely going to be looking as the events during the two-year span to leave the EU, following the triggering of Article 50, play out.
So how will Brexit impact the UK high street?
The financial news has been dominated by news that the pound has hit a 31-year low against the dollar. For the majority of major retailers in the UK, they already have sufficiently independent operations to make this a non-issue. Unless you happen to be dealing with a small store that imports everything from abroad, the drop in the currency should have no effect on the UK high street.
At the same time, smaller, independent home-grown retailers should not be impacted too heavily because everything they spend is spent in the UK.
The coming of Brexit has profoundly impacted the large UK companies that trade on the stock markets. They have significant international interests, which mean they are more exposed to the dangers of Brexit. Their shares have dropped massively, as a result.
Despite their declining profits, this will not impact food prices and such like you may think. If anything, they are set to go into decline because of continuing low inflation rates. As of this writing, inflation rates are set at about 0.3% and are unlikely to rise anytime soon.
With interest rates eclipsing inflation rates, the carnage on the financial markets is unlikely to impact the prices of your everyday goods.
Many companies on the UK high street could easily expand because of warnings from the Bank of England about declining interest rates. Declining interest rates are positive for high street businesses because it means they can borrow for less. There are even whispers that interest rates could go down to 0%. That would mean that companies could borrow from the banks for free.
Businesses are sure to take advantage of this, so it would come as no surprise to see the high street expanding, as a result.
The current economic turmoil is unlikely to cause the end of any particular brand, at least not any brand that was not already in trouble before the referendum. Some brands are likely to run into trouble if they happen to import the majority of their goods, but on the whole, the economy has not been that hard hit.
Other than issues within the stock market and the declining pound, the fundamentals that make the European economy so strong remain in place.
What people so often fail to remember is that the UK stays in the EU until two years after the triggering of Article 50, which has yet to be triggered. In the meantime, they remain a member of all EU trading agreements. Even when the UK does leave, there is a high chance that the UK will continue to be within the single market.
In short, the impact on the high street will not be anywhere near as bad as the media likes to make out.
Consumers have no reason to panic, and there is no need to start changing your shopping habits. In the weeks after the referendum, the economy is fragile but still stable. Unless something drastic happens, the UK high street is unlikely to change much at all.
What do you think is the fate of the UK high street after Brexit?
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