On June 23rd, voters will settle a debate which has raged on the front pages and in news broadcasts for months now; should Britain leave or remain in the European Union? While a vote to remain is still the bookies favourite the leave campaign has gathered plenty of momentum and the result is in the balance. Andrew Marsh, Manager at Michael Page Retail, discusses how the possibility of a Brexit has affected the retail sector and what impact it has had on recruitment.
Retail slow down due to uncertainty
Recruitment activity within retail has certainly slowed in recent months, particularly among businesses who trade within the EU marketplace. It is economic factors that are causing the hesitation; the value of Sterling has been in flux and recently hit its lowest level against the Dollar since the GFC while major banks and financial institutions such as The Bank of England and The IMF have predicted that a vote to leave could further damage its value as well as pushing up inflation. This could have considerable implications for import prices and consumer prices which is causing retailers to hesitate. Companies have been awaiting the outcome of the June 23rd vote before making any senior appointments.
With many analysts predicting that a vote to leave could lead to a short term economic slump there are implications for recruitment activity. Some reports predict that a slump could last up to two years while the UK renegotiates trade agreements with the EU. This slump is likely to affect businesses which trade within the EU and some may be forced to reduce headcount in the interim while the market recovers.
Within retail it is the finance and sales operations which are feeling the effect of market hesitation due to the part these functions play on wider business growth. Many larger UK retailers see international expansion as a key part of their model for growth and the operational side of retail businesses are intrinsically linked to expansion. If this expansion into Europe is made harder by the UK leaving the European single market then those functions could be scaled back and jobs may be at risk. Major decisions on business direction are firmly on hold until the result of the vote and as such recruitment into sectors which support business growth is down.
SMEs, where margins are finer, may be affected by any slump more than large corporates and layoffs may occur. Smaller retailers can react by building on current portfolio and increasing local offers to match strong supplier demand across the board within the UK. Many have already developed contingency plans and are looking beyond the downturn and toward the likely uplift in the market once trade deals are renegotiated.
While SMEs are likely to feel the pinch in the short term larger corporates should be able to absorb any slowdown and will be positioned to benefit once the market turns around. We are unlikely to see reductions in headcount during that time.
In fact, among large corporates, the impact of the recently introduced National Living Wage may well have been viewed as a bigger potential bump in the road than the prospect of leaving the EU. If the predicted slump does occur I’d be confident that once the market has settled an uplift in recruitment activity will be similar to that which we saw in the years following the GFC.
The recent collapse of both BHS and Austin Reed prove that with an ever evolving retail landscape if you don’t adapt to uncertainty and change your business model you risk getting left behind.
Candidate confidence remains strong
From a candidate perspective, this uncertainty is only really reflected at the senior end of the market. Very few candidates at Director or an international level are currently active in the job market. We would expect this to change once the result of the vote is in and senior people can be confident in making career moves.
At ground level and the operational side confidence in the market remains reasonably strong and candidates are still happy to move. With that said we are seeing that candidates are preferring to move to large corporates over SME businesses as they perceive there to be less risk. SMEs are finding candidate attraction hard and will have to consider the package they are offering to attract clients in this climate.
Immigration seems to have been brought to the very centre of the debate and the free movement of labour is a key consideration. Those retailers who rely heavily on low-skill, low-paid workers, such as embattled sportswear firm Sports Direct, often rely on workers from Europe and may feel the effects of a Brexit when work visas are harder to secure. This does, however, have the potential to open jobs and wide-scale recruitment in these ground level positions may be necessary should the UK vote to leave.
For a confidential discussion about recruitment in the retail sector contact Andrew Marsh, Manager at Michael Page Retail.
T: 0121 230 9369