Consumer companies start to brace

Think about the last time you walked down your high street. How many job ads did you see in the windows of your local shops, bars and restaurants? In recent months, they’ve started to multiply, an A4 reminder of Brexit, and the impact it is already having on UK businesses.

It’s estimated that more than one million skilled EU workers will leave the UK because of Brexit. Competition for talent will skyrocket. At the same time, rent reviews, business rate increases and potential interest rate hikes will squeeze consumer companies further. Retailers and operators have started to brace. 

Our Brexit Monitor Index shows consumer businesses’ outlook dropped sharply over the past quarter. Sentiment about company prospects plunged 14 points, heading towards negative territory. It’s now sitting at 91 on a scale of 0 to 200 (where 0 signals a strong negative effect, 100 no effect and 200 a strong positive effect). 

Uncertainty around the UK’s future trading relationship is a major sticking point. As the long-term view moves out of focus, consumer businesses are finding it harder to make confident strategic decisions. Should you invest in that huge tech update? Should you still expand overseas and, if so, where? The result is inertia. 

We’ve also seen an increase in store closures. Businesses are pulling the shutters down far more quickly as they try to avoid declining profitability. Trading through is increasingly overlooked as companies try to conserve cash and shift attention to more buoyant locations. 

So how can you stand out in this new operating environment? The most successful companies are regularly reviewing their approach. They’re making sure they have the funding and finance to support their vision. And they’re rethinking their real estate portfolios to make sure they’re not only profitable, but sustainable. 

We’re also seeing frontrunners lock-in talent through share plans, flexible working or favourable pay and reward packages. Others are investing in innovation, introducing breakthrough products and store concepts. Have you seen more seasonal menus pop up? It’s just one way businesses are trying to keep their offering fresh and interesting. 

Overall, it’s clear that well-branded companies with distinct concepts and products will continue to thrive. The most successful are keeping a laser focus on their customer and sector niches. 

Discounters with very efficient business models also capturing attention as consumers increasingly make value-based choices for everyday essentials, while loosening the purse strings for larger ticket items. 

There are still success stories. The collapse of Monarch may have hogged the headlines in recent weeks, but it’s also worth remembering that Boohoo, Pizza Express and Tui have also recently reported profit surges. 

Over the next few months, organisations must also deal with Black Friday and Cyber Monday. While tempting, discounting will not guarantee growth – it could end up eroding profits instead. 

Businesses must think carefully about their pricing strategies in the run up to Christmas. In a time of volatility, board-led decisions have the potential to both make and break a business.