It is too early to talk about the direction of development after Brexit, and even if it will really leave Europe in the future. In any case, Brexit has had a short-term impact on the Swiss watch industry.
Stay or leave? On June 23, 2016, the United Kingdom held a referendum to decide whether to leave the European Union. The news the next day shocked the entire country’s political system and economic life. According to Google UK data, after the referendum results were announced, on June 24th, the search for ‘WhatistheEU?’ Rose sharply, and soon became the second most popular topic in Google UK Some people finally remembered what they were searching to vote out. More than two weeks later, Britain was still affected by the aftershocks of the referendum, and there was no clear way forward in the dilemma.
Almost all experts predicted that leaving the European Union would have a negative impact on the British economy, but the voice of ‘leave’ relied on inciting populism and rejected expert opinions. Before the official announcement of the referendum, the pound had fallen to its lowest level in more than 30 years; after the opening of the stock exchange, British banks’ assets had evaporated by a third. Generally speaking, the former can be regarded as good news for the luxury goods industry. As Bulgari CEO Jean-Christophe Babin told The Economist before the referendum, the devaluation of the pound can promote brand tourism sales.
As long as tourists come in, everything will flourish. However, Qing Wang, a professor of marketing and innovation at Warwick Business School and director of the Warwick Luxury & Innovation Center, raised some questions.
‘The UK is open and enthusiastic to tourists and businesses from emerging countries like China, but Brexit will adversely affect this image. The UK is politically stable, the legal framework is perfect and transparent, and many Chinese businesses and investors Think of the UK as a bridge to Europe. The UK’s positive image of ‘soft power’ has always played an important role in trading with emerging countries like China. However, after the Brexit referendum, Britain’s influence on Europe has been As their uncertainty and risks increase, Chinese companies have to re-evaluate their internationalization strategies. ‘
However, the domestic market does not only include tourism sales and Swiss exports (Swiss watches and clocks exported to the UK accounted for 5.4% of the global total in 2015). After the devaluation of the pound, watches and clocks suddenly became more expensive for local residents. Industry observer René Weber from Vontobel estimates that the UK market accounts for 5% and 3% of Richemont and Swatch Group sales, respectively, both of which will be affected by changes in currency exchange rates. The UK is one of the better-performing global markets for the Swiss watch industry, and Brexit will not be the news that giant groups and famous brands want to hear, especially in this challenging year.
Although the impact of currency exchange rates and stock exchanges is intuitively visible, as long as the British parliament is at an impasse, the medium and long-term outlook will not be clear. René Weber explained: ‘No one knows what form the UK will use to cooperate with the EU in the future. If the UK activates Article 50 of the Lisbon Treaty and initiates the Brexit process, there will be a two-year consultation period in between. So far, where exactly Britain will go is still up in the air. ‘