Brexit And What Does It Mean For Luxury Goods

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Britain’s move is unprecedented, which indicates little certainty about what will actual happen, but one outcome to think about is Brexit may cause consumer confidence decline.  If shoppers don’t know what is ahead in months to come, they will most probably skip on expensive trips and purchases, which could say that trouble for companies selling high-end goods to UK consumers is on the way down for a short term.  How events could unfold;

  1. Spikes in uncertainty
  2. Currency adjustments
  3.  Market asset declines
  4. Consumer & business confidence is damaged
  5. Investment in companies are postpones
  6. Global growth & higher risk of recession

The adverse effect on the luxury sector is slightly because of the depreciation of the sterling currency. Take for example Burberry, which is made in Italy, to keep the quality the brands cost is calculated using euro, plus the luxury sector is affected by Brexit because the creative and design talent between the EU and the UK’s flow of barriers, meaning it’s expected that many top designers may exit London and go to Paris, Milan or possibly Edinburgh if Scotland’s demands for an independence vote takes place.

Also, the Brexit vote threatens to hurt a top source of visitors to North America and further strength to the dollar, worsening two main headwinds that have been affecting retailers. With restrained consumer spending and trips to North America we can be sure to see a decline in online spending and mall traffic.

Good news for consumers paying for goods or services from the UK in another currency is the devaluation of sterling will make for those cheaper when importing in other Eurozone countries and overseas internationally.  However for UK citizens and companies who buy from the Eurozone and international vendors will find prices are likely to rise.

Essentially, those companies selling luxury goods and services to UK consumers need to watch how the market plays out hereon and adapt accordingly.