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Burberry highlights Brexit risks

Luxury group Burberry has highlighted a number of risks that it believes it could face as a result of the UK’s decision to leave the European Union.

Burberry formally filed its annual results for the 12 months ending March 31 2018 with the financial authorities in London on June 6. Among the notes it included with the filing was a section on its home country’s exit from the EU (Brexit), which is scheduled to take place in March 2019.

“Various Brexit scenarios could impact the group’s financial position, supply chain and people,” Burberry said. On giving examples, it pointed to the general uncertainty that has surrounded Brexit as potentially having an impact on its financial performance. It’s two years since the referendum that resulted in a vote in favour of leaving, but debate continues around almost all of the consequences of this vote and there is little clarity about what it will mean for businesses.

Leaving the European Union is likely to mean an end to duty-free access for UK companies to lucrative markets in the EU and, beyond that, markets with which the EU has a free-trade agreement. This will mean additional customs duty on Burberry products, the company said, and “VAT cash flow costs at the new UK trade border”.

Its other concerns are extended supply lead times, increasing working capital and uncertainty over the rights of EU nationals to work in the UK after Brexit, which Burberry said means “the risk of losing talent”. Exchange and interest rate volatility impacting Group revenues, margins, profits and cash flow.

The company has set up a Brexit steering committee to monitor all developments and is engaging with UK government departments “to ensure they are fully informed of our circumstances and concerns”.

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