Quarterly Brexit Report: Q4 2018

Brexit

About This Report

Dec 2018

In November 2018, the United Kingdom (UK) and European Union (EU) finally settled on the Withdrawal Agreement and a political declaration for future relations. This now needs to be ratified by parliaments with the first big hurdle due in a vote by the House of Commons in December 2018. The risk of a No-Deal remains. Euromonitor International’s Analytics models contain a range of Brexit scenarios, to help understand the impact on UK consumer goods industries, the economy and consumers.

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Quarterly Brexit Report: Q4 2018

Key Findings

No-Deal Brexit would disrupt supply chains of alcoholic drinks

Supply chains would be disrupted, if the UK was not able to access the EU Excise Movement & Control System (EMCS). Spirits sales are expected to record a loss of 6.1 million litres from the baseline under a No-Deal Brexit over the forecast period.

Light/No Brexit will retain funding for Nottingham’s life sciences sector

A Light/No Brexit will add 23,700 more Social Class B households in Nottingham compared to baseline forecasts over 2017-2022.

Light/No Brexit would speed up the redistribution of people up the wealth pyramid

The poorest Social Class E would shrink instead of expanding and in 2022 would include 300,100 less individuals compared to the baseline scenario.

A No-Deal Brexit would increase unemployment

A No-Deal Brexit scenario would deteriorate UK business conditions and would increase the unemployment rate to 5.9% in 2022.

Energy drinks face large Brexit headwinds for Suntory Holdings

Lucozade has the potential to become a US$1.0 billion brand by 2022. However, the category’s income elasticity of 0.64 is high for soft drinks, and considering the current growth momentum, there is a lot to lose from a Brexit-related slowdown.

Introduction

Scope
Key events so far: withdrawal Agreement and political declaration
Future developments to watch
The road ahead: ratification by parliaments needed
Key findings
Brexit scenarios defined

UK Economic Outlook and Baseline

GDP and private sentiment
Outlook and Brexit negotiations
Inflation and monetary policy
Labour market and retail sales
Latest data: economic growth edges up aided by a good weather

Impact on Consumer Markets

Packaged Food: stockpiling of ingredients and products
Beauty and Personal Care: need for more structured regulation
Soft Drinks: can Brexit provide a relief for sugar imports?
Hot Drinks: could a No-Deal boost the number of health claims?
Home Care: Brexit seems to have little impact on Home Care
Tissue and Hygiene: No-Deal Brexit looming over manufacturers
Alcoholic Drinks: trade associations optimistic over draft deal
Travel: uncertainty to remain until final Brexit deal is in place

Impact on Companies

Brexit and its impact on FMCG companies
Spotlight on Suntory Holdings: Brexit impact
Spotlight on Suntory Holdings: UK sales by category
Suntory’s M&A strategy runs into Brexit

Light/No Brexit Scenario

Economy: Light Brexit to speed up the UK economic recovery
Consumers: Light Brexit would push up individual wealth
Consumers: top-income segment to expand the fastest
Cities: Liverpool’s top segment the key growth area outside London
Spotlight on Nottingham: Light Brexit protects life sciences industry
Packaged Food: Light/No Brexit would reassure the food industry
Beauty and Personal Care: bright prospects for Sun Care
Soft Drinks: bottled water to profit most from a Light Brexit scenario
Hot Drinks: a Light Brexit scenario would benefit tea
Home Care: discretionary products likely to benefit
Tissue and Hygiene: sales of diapers to benefit from Light Brexit
Alcoholic Drinks: a Light/No Brexit scenario would boost growth
Travel Arrivals: Light Brexit to restrain inbound receipts
Travel Departures: impact felt the most on outbound expenditure

No-Deal Brexit Scenario

Economy: No-Deal Brexit to result in long-term negative effects
Economy: possible No-Deal Brexit scenarios
Consumers: No-Deal Brexit would hurt top segments the most
Consumers: households unlikely to exit the bottom in a No-Deal
Cities: Southampton’s middle segment most resilient to No-Deal
Spotlight on Nottingham: No-Deal will stymie expenditure growth
Packaged Food: Light/No Brexit would reassure the food industry
Beauty and Personal Care: premium categories to be hit hard
Soft Drinks: still bottled water to lose out in a No-Deal Brexit
Hot Drinks: premium teas to suffer in a No-Deal Brexit
Home Care: Toilet Care likely to take a big hit in a No-Deal
Tissue and Hygiene: foreign manufacturing to hit Adult Incontinence
Alcoholic Drinks: a No-Deal Brexit could cripple the supply chain
Travel Arrivals: limited scope to benefit from a No-Deal Brexit
Travel Departures: expenditure growth restrained without a deal

Conclusion

Key insights: Light/No Brexit
Key insights: No-Deal Brexit
Scope and objectives
Definitions
Brexit scenarios defined