Geopolitical tensions, the imposition of tariffs, global security issues, currency volatility and economic challenges – these phrases loomed large in the results statements we’ve seen over the last year and there’s a couple of very good reasons why.
In Europe, the news agenda has been dominated by the ongoing Brexit saga – at the time of writing, May’s Brexit deal is on dodgy ground – and, even if it does pass in the UK, Spain is up in arms over Gibraltar so we’re on the brink of a ‘no deal Brexit’. Although, those of us who voted remain in the first place and those leavers who are now regretting the whole thing are pinning our hopes on the throwaway ‘no Brexit at all’ comment tucked into May’s speech.
What could Brexit mean for the cosmetics industry? Well, financially, the Bank of England’s predictions are the stuff of nightmares and, on the regulatory front, a UK REACH will replace the EU REACH for the UK market and companies will need to appoint a UK-based responsible person as the UK will no longer recognise responsible persons based in an EU country – which in turn will trigger a labelling revisit. In the case of a no deal, cosmetics manufactured in the UK could face being rejected by the EU pending authorisation and certification and vice versa. Non-British cosmetics industry professionals who are working in the UK could find their right to work is rescinded, and Brits working abroad may suffer the same fate.
However, at the moment, it’s very much business as usual – London continues to attract tourists and new retail developments are being built. Some believe that, post-Brexit, London will be hot property if May comes good on her promise of low tax and ‘smart regulation’. We’ve certainly seen Unilever elect to stay (albeit not entirely voluntarily) and Lush is yet to make good on its promise to leave.
Curiously, beauty sales in the UK appear to have been buoyed by Brexit thus far. CEW reports that, since the referendum, beauty has outperformed other retail sectors, which it is attributing to the lipstick effect. The category is expected to reach a value of £26.9 billion by 2022.
Whether that will continue in the face of the inevitable currency slump, price rises and wage falls that will follow a no-deal Brexit is another matter altogether – which brings us to the other headline grabber of the year – Trump’s tariffs.
Throughout 2018, there’s been rumblings of a ‘trade war’ as Trump’s protectionism was met with, unsurprisingly, retaliation from almost every country he sought to penalize. Of all Trump’s policies, the proposed tariff on Chinese imports has proven most divisive with many predicting a full scale trade war as the only possible outcome – Walmart even went so far as to appeal to US Trade Rep Robert Lighthizer, and threaten price rises while urging its suppliers to look elsewhere for product.
So is the China-US tariff tit-for-tat going to have grave consequences for multinationals? Well, so far, so good. For going by L’Oréal, LVMH and the Estee Lauder Cos’ results, Chinese demand is yet to be dented by these rumblings – although you just have to look at the shockwave caused by a Chinese border crackdown on imports in October to understand just what could happen in 2019 if relations worsen.