Marks & Spencer (MKS.L) has said the UK’s new free trade agreement with the EU will “significantly” impact its business in Ireland and franchises in the EU.
M&S on Friday said its business in Ireland and the Czech Republic and franchises in France would suffer due to tariffs on goods exported to the EU and “very complex administrative processes.” The company said it was “actively working to mitigate” the impact.
The warning comes a day after Debenhams took the decision to shut its Irish website due to the impact of the trade deal. John Lewis has also stopped serving Ireland.
Britain struck a free trade deal with the EU on Christmas Eve, averting a no-deal Brexit on 1 January. UK prime minister Boris Johnson hailed the deal as an economic victory for Britain at the time.
While the agreement preserves tariff and quota-free trade directly between the UK and EU, it imposes charges on goods re-exported into the bloc. That means goods imported into the UK from third countries like China and then shipped on to the EU face tariffs. The charges apply to both food and goods.
ITV reported on Thursday that at least 50 retailers were reviewing their businesses in light of the new rules.
“Tariff free does not feel like tariff free when you read the fine print,” Marks & Spencer chief executive Steve Rowe told ITV. “For big businesses there will be time consuming workarounds but for a lot of others this means paying tariffs or rebasing into the EU.”
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M&S’s warning on the impact came as the retailer reported what it called “robust” trading over Christmas. Total sales fell 3.6% in December and were down 8.2% across the third quarter. Sales were dragged down by Mark & Spencer’s clothing and homeware division, which slumped by 25% in its third quarter.
“Given the on-off restrictions and distortions in demand patterns, our trading was robust over the Christmas period,” Rowe said in a statement. “More importantly beneath the Covid clouds we saw a very strong performance from the food business, including Ocado Retail, and a further acceleration of clothing & home online.
“Near term trading remains very challenging but we are continuing to accelerate change under our Never the Same Again programme to ensure the business emerges from the pandemic in very different shape.”
M&S said the current “effective UK wide lockdown” would hit sales and the business was managing stock accordingly. Shares rose 2.3% in early trade.