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Should Pet Retailers Care About Brexit?



Pet store owners in the U.K. sent a strong message in the Brexit referendum—voting by 54.7 percent to 45.3 percent to leave the European Union.

In many ways, this action shouldn’t come as a big surprise. Sure, the big corporations and financial institutions almost unanimously favored staying in the EU largely because they reap the benefits of trading with the other European states.

For a retail business on the High Street in most British towns, the benefits were much less obvious and the downsides all too apparent.

Europe’s strong suit was regulation, with the government in Brussels handing down edicts that had to be followed throughout the EU. This began when the U.K. first joined and then had to put in place the European-style Value Added Tax. VAT—unlike an American sales tax—is applied at every stage of production and finally to the consumer. In Britain, the VAT is 20 percent and is rolled into the retail price. Unless they are prepared to do the math, customers don’t see that the government—not the retailer—is responsible for the much higher price.

Then Europe decided that British retailers would no longer be allowed to sell products in pounds and ounces, or pints and gallons. If they didn’t market everything in metric measurements they would face hefty fines. So a 35-pound bag of dog food becomes a 15-kilo bag. Puzzled older customers loved that.

For manufacturers though, it was a different story. Europe had massively expanded the market in which they could sell and now they are concerned.

“We hope the government will be able to reassure those manufacturers (who export) that they will continue to be able to do so confidently without incurring far higher levies and costs,” said Britain’s Pet Industry Federation in a statement.

Alan Hawkins, the CEO of the British Independent Retailers Association, said overall retailers were split evenly on the big vote. But he was taking it in stride.

“Whatever we thought about Brexit we are where we are today,” he said.

The Pet Industry Federation said pet welfare was one of the least regulated activities under the E.U.: “Laws covering pet welfare largely devolve to the member states.”

The biggest hurdle for businesses in Britain for the moment is the total confusion over what to expect next. The most immediate effect for retailers, though, is likely to be the higher price for imported products, because the pound has sunk in value since the Brexit decision.

Does any of this make any difference to U.S. pet retailers? The main danger would be that this could lead to a worldwide recession and consumers pull back on spending again.

The one plus though, said Richard Williams of George Mason University, is that it may serve as a wakeup call to the federal government.

“I think over the next few months we will hear a lot more about how regulations hurt small businesses and perhaps put pressure on Congress to act,” Williams said. “Clearly the regulatory reach of Brussels was just one of the factors that prompted the U.K. to go this way, but it was still significant.”

 

Steve LeGrice is general manager for Pet Product News.

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