How will Brexit impact UK jewellery businesses?

negotiation period began following the activation of article 50 last year, leaving the results of the Brexit decision still largely unknown. As a result of this uncertainty, many businesses have been left wondering what the future will hold.

Several key figures in the jewellery industry were questioned at an industry dinner event prior to the vote. The results only served to highlight the uncertainty – 43% wanted to remain, 37% wanted to leave and a massive 19% were undecided. Though the pound did fluctuate in value immediately after the Brexit vote, October 2017 saw retail sales rising by 1.3% compared to the same period the previous year. Some experts are not optimistic however, with many predicting a weakened economy in the years to come.

So, how will this impact the UK jewellery industry and how can we predict the long-term effects? We investigate the impact of uncertainty in the market today and discuss how jewellery retailers can adapt and prepare for change.

Falling value of the pound

Since the results were announced the value of the pound has continuously fluctuated. A weak pound is bad news for the jewellery industry, as metals and gemstones are traded globally. The more the pound falls in value, the more the cost of these materials rises. Furthermore, luxury items tend to have a relatively low inventory turnover, which could make it harder for jewellery retailers to sell their pieces when combined with rising costs.

A price rise in the jewellery industry may not be such a bad thing however, the UK draws in many visitors who enjoy spending on luxury goods and the price increases could lead to people perceiving the goods as higher quality. Foreign visitors could also be more drawn to visiting the UK, as British currency is now cheaper for them to buy. Increased tourism could lead to increased jewellery sales, as visitors choose to buy pieces on their holidays.

Trade disruptions

As trade regulations for imports and exports have yet to be confirmed, the future of many retailers supply chains remains unclear. 32% of businesses who use suppliers based in Europe have reported that they are looking for UK alternatives. A large number of jewellers also outsource their materials and rings from abroad, which may not be possible in the future. Jewellers would have to find domestic sources for these materials, which could end up lowering the quality of the jewellery available. This is not necessarily a bad thing, as it could encourage more skilled workers to enter the industry, leading to a more self-sufficient UK. It does take time to train new workers however, with apprenticeship schemes requiring careful planning and more government funding.

Jewellery retailers often use hallmarking on their pieces, as a reputable hallmark increases their value and attracts more buyers. Some retailers have expressed concern that some EU countries, including Italy, Spain and France, could choose not to recognise UK hallmarks in 2019. This could result in companies moving their hallmark operations to other countries – taking their money with them.

Planning ahead

With the future looking so uncertain, many jewellery retailers are unsure of how to plan ahead. Whilst many industry experts expect prices to rise, some believe that luxury products will always draw in customers. Others have expressed concerns over industry disruptions.

A 2017 survey of over 2000 supply chain managers on a global scale (of which more than 900 were UK businesses with supply chains in Europe) indicated that 80% believed that the EU split is making it hard to make long-term plans. It isn’t just supply chain managers expressing concerns – 23% of design graduates said that they were worried about the effects of Brexit on the creative economy in the UK.

Businesses will likely suffer as a result of being unable to plan ahead, particularly those in the jewellery industry, who are mostly unable to adapt their offerings too much.

How can the UK jewellery market prepare for the changes?

Jewellers have been advised not to make any long-term fixed plans during these uncertain times, as these could potentially be interrupted in the wake of Brexit. So, how should jewellery retailers adapt to the uncertainty now?

It is important to maintain an online presence. Several prominent jewellers have reported online sales increases following the Brexit vote. The key is to focus more on customers from other countries and non-traditional markets.
Maintaining high standards of customer service through all of the distribution channels
Online presence is important – many jewellers have reported a rise in their online sales after Brexit. The key is to focus on non-traditional markets and customers from other countries.
Keeping up excellent customer service standards through each distribution channel. It is important that sales remain high, however jewellers should keep in mind that their customer base is often varied, and some prefer to make their queries in person or over the telephone than online.
Ensuring that you have a product range to suit all needs. Research shows that Generation X are spending more on heirloom jewellery, whist Millennials tend to go for pieces with shorter lifespans.
It’s important to maintain a positive attitude. Angelic Diamonds engagement ringshave seen the cost of precious metals increase, along with an increased demand from overseas customers due to the fall in pound sterling. Even with all of the uncertainty in the market, those in the jewellery industry should remain positive about the future post Brexit.