Beauty firms are bracing for uncertainty in the wake of Britain’s decision to leave the European Union, but gaging the ultimate impact of the vote is still one big guessing game.
“People presume there will be an impact to the British economy, but that’s just guessing,” said Stifel analyst Mark Astrachan. He added that should the pound weaken it could prompt a surge in tourism to the U.K., which could ultimately offset any economic slowdown.
A slowdown may offer an opportunity for value-price beauty brands to shine, but Mark noted that even high-end beauty items are a relatively inexpensive luxury.
“It’s just too soon to know,” said Mark. “It’s a bit of a guessing game.”
An uptick in tourism could be a boon to beauty destinations, such as Selfridges and Harrods, which already largely cater to foreign buyers, said Paco Underhill, founder and Chief Executive Officer of Envirosell.
In Paco’s view, beauty shoppers are increasingly aware of pricing across the globe. “The sophisticated beauty consumer isn’t local, she’s global,” he Paco.
Financial consultant Javier Escalante noted Brexit may only have a fundamental impact on firms with manufacturing operations based in the U.K. Even then, he forecasts that the effect should be negligible, “as the devaluation of the British pound already offset potential increases in tariff.” Javier continued, “I don’t think Brexit itself would reverse decisions such as Avon or Coty of moving their headquarters to London because having [General and Administrative expensive] paid in pounds now is fractionally less expensive for global companies.”
Beauty firms are hesitant to weigh in on the issue given the uncertainty.
“There’s not much perspective we can share on Brexit, it’s still very early days in the process,” said a Procter & Gamble Co. spokesman. “P&G remains committed to serving consumers in the U.K., as we have for more than 80 years. We will work with the U.K. government and other organizations as needed to help ensure a smooth transition.”
Paco said he expects that more countries may put the EU issue in front of voters, which could potentially lead to more exits.
Adam S. Posen, economist and president of the Peterson Institute for International Economics, said, “The direct effects on the U.S. economy are small.” He made the remark during an event on June 27 at the London School of Economics devoted to Brexit. He added that in his view there will be an impact on the U.K. and its global standing. “There will be a diminishment fundamentally in Britain’s global role and this has major economic effects on the world.”