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Market Commentary

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Weekly Retail & Leisure News - 05 July​​​, 2016​​​​​​​​​​​​​​​​​


Brexit: uncertainty, volatility and opportunity?​

Just over a week on from the EU Referendum, the short-term impact has been uncertainty and market volatility. Consumer confidence has been hit in the immediate aftermath, but is likely to rebound once the initial shock has subsided; underlying economic fundamentals in the UK remain solid, certainly in comparison to previous downturns. The Bank of England has announced that it is likely to cut interest rates to cushion the blow of Brexit, maybe as soon as July, which will provide further mortgage debt finance relief to consumers.

For retailers, it is very much a case of business as usual in the short-term, until the full impact of the Referendum becomes clear. While mainstream retailers are likely to be assessing the current situation, and some will defer decision-making for a period, for some this is a good opportunity to capitalise on the uncertainty, and position themselves for any fallout in the sector.

In the medium-term, a period of weak sterling will inevitably lead to rising consumer prices and an end of price deflation for UK retail.  The currency fluctuations will, however, reduce the cost of exports, benefitting UK retailers exporting globally. Currency movements could also boost tourism numbers to the UK, from the US, European and Asian markets; this will be of clear benefit to Central London and other UK tourist destinations. Other sectors that could prove resilient include Food and Beverage, which has demonstrated its defensive characteristics during previous downturns.

For further analysis of the potential implications of the EU Referendum on the UK property market, please refer to our report, ‘EU Referendum: Making sense of Brex​it - 5 days on’.

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