Rishi Sunak is not right about much, in my opinion. But one thing he said in his speech calling the general election rang true – we live in the “most uncertain of times”.
Since the announcement of the election, the UK has been focused on its next government and pledges made by the major parties. In all likelihood, we will have a new prime minister on July 5 and much change in the rest of the year.
While it is right to focus on the details of the policies and examine which party might bring much-needed reform such as a fresh approach to business rates, measures to tackle retail crime and fixing the apprenticeship levy, there are much bigger, darker clouds on the horizon.
Geopolitical tensions
Whatever the outcome of the UK election, provided a single party wins a majority, we are likely to enjoy continued stability and economic growth.
The same cannot be said for the rest of the world where geopolitical upheaval is causing disruption and may yet cause more.
In 2024, there will be at least 25 national elections around the world, any of which could signify disruption. Most significantly of course is in the US where, for the first time in its history, there is a convicted felon aiming to gain the keys to the White House. The nation is divided and its economy is less stable. The outcome of the presidential election in November will impact the global economy and shape relations between the US and other nations, particularly China.
Amazon and Apple, as well as UK retailers with US operations, such as Primark, Fat Face and Mountain Warehouse, should be watching these elections closely. There could be a knock-on effect on the global economy and UK-US exchange rates.
Supply chain disruption
Supply chains are easily disrupted by geopolitical tensions and global events. The cost of international shipping has soared since last December when major companies suspended services in the Red Sea following attacks by Houthi rebels.
With no end to this disruption, costs continue to soar and emissions increase due to longer routes being taken. With new routes increasing shipment times by around two weeks, there is a rush to ship goods in time for peak season and the crisis continues to cause cost and logistics headaches.
Despite the quality and cost benefits afforded to companies shipping items from China, now may be the time to consider diversifying supply chains and opportunities to source items closer to home.
Europe and the Brexit hangover
UK exports to the EU have suffered significantly since Brexit because of escalating logistics costs and red tape. Research by Retail Economics and Tradebyte found that fashion exports plummeted more than 60% between 2019 and 2023.
Some might have hoped for a rapprochement between the UK and EU if Labour wins the election but this now looks increasingly unlikely in light of the EU parliamentary elections that saw a surge by hard right parties.
Further uncertainty is likely following the announcement by President Emmanuel Macron of a snap general election in France. Retailers trading in both the UK and EU will need to keep a very close eye on political change in the region.
The China conundrum
Trade tensions between the world’s second-largest economy China, the US and the EU are growing. China is being accused of flooding Western economies with heavily subsidised exports, from electric vehicles to steel, to alleviate weak domestic demand.
Retail is certainly feeling the impact from China, with rapid growth by Shein and Temu with their VAT-free exports leading to loss of market share for domestic players during the cost-of-living crisis.
As debate continues over the potential of a Shein listing on the London Stock Exchange, concerns are being raised over its impact on industry standards and sustainability.
France is lobbying the EU for measures to protect domestic companies from a glut of Chinese products flooding the market. This will be an interesting development to watch and one the UK government must also ponder.
Keep an eye outwards
But I don’t want to sound like a Debbie Downer. To be successful, retail should rightly be focused on the basics of providing great products to customers and the details of brilliant retailing.
The UK election will bring inevitable policy changes and perhaps for the better. But with increasing global instability and interdependencies, we must also ensure that business leaders are looking outwards to avoid potential curveballs from events happening elsewhere in the world.
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