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55% of retailers and wholesalers plan to expand their overseas sales this year
Sukh Nat, our Head of Retail and Wholesale, gives his take on the results of the latest Trade Barometer in relation to UK retailers and wholesalers.
The UK’s retailers and wholesalers are displaying continued resilience. Despite enduring a softening period for the sector, more than two-thirds (70%) of companies in the industry are confident or very confident their businesses will grow over the next three years, the latest edition of the Santander Trade Barometer reveals. More than three-quarters (79%) expect to take on staff over the next 12 months, while almost as many (74%) anticipate investing in product development.
This optimism reflects the hard work retailers and wholesalers have put into sustaining growth in the face of some challenging headwinds. They have had to confront the changing behaviours of consumers who increasingly shop online. The decline in the value of the pound in 2017 raised sourcing costs. Higher business rates and the introduction of the national living wage have added to the pressure. But the sector has emerged stronger, more innovative and more broad-based.
In particular, many retailers and wholesalers have seized the opportunities presented by international markets.
The Trade Barometer shows that 59% of businesses in the sector already sell goods or services outside of the UK; 55% of companies plan to expand their overseas sales over the next 12 months.
This makes sense, providing the sector with a means to diversify as well as to drive growth. To take just one small example, businesses in the toys and baby goods market have noticed a slowdown in consumer demand in the UK in recent months; but for firms with a presence in China, this has been more than compensated for by a rise in sales following the Chinese government’s abolition of the one-child rule.
In a market environment where retailers and wholesalers still face significant threats, de-risking will be an important strategy. Currently, 51% of businesses in the sector are concerned a slowdown in the UK economy could negatively impact them over the year ahead, while 48% are concerned about the potential fall-out of a rise in UK interest rates. Any squeeze on the incomes of UK consumers will make international sales even more valuable.
Planning ahead of Brexit
Then there is the question of Brexit, a risk that looms large for 47% of retailers and wholesalers. Preparing for Brexit in the face of so many unknowns is tough for a sector at the end of the economic value chain, which may explain why only 32% of retailers and wholesalers have made plans for the UK’s departure from the European Union – fewer than in any other sector except mining in the Trade Barometer. Businesses face an anxious wait for clarity on whether tariffs will be introduced on cross-border trade with the EU, how frictionless that trade will be, access to labour and the legal and regulatory environment post-Brexit.
Still, Brexit will bring new opportunities too. For example, new trade deals with large economies such as India and China could see tariffs reduced, boosting sales and reducing supply chain costs. Again, for retailers and wholesalers that are sufficiently brave and ambitious to look globally for trade and sales growth, there is reason to be optimistic.