Assuming the vote on the 23rd of June produces a majority for Brexit, we would expect the Prime Minister to come under intense public pressure to invoke article 50 of the treaties straight away and set the divorce process in motion.
In such a scenario we forecast modest growth for UK retail, but this is down to stagflation - the combination of rising prices with flatlining demand - a nightmare scenario to manage for the Bank of England and for retailers too.
To put this into context: Post Brexit growth is not something to be celebrated, because even in 2008, the year of the greatest financial crash since 1928, UK retail grew due to runaway inflation. Declines in UK retail spend are extremely rare and yet according to latest ONS data the sector is flatlining already.
After a Brexit vote, for the second half of 2016 retail volume declines are likely. On the one hand this is a byproduct of inflation, as Sterling will come under pressure and most product imported from overseas (from clothing to furniture to consumer electronics) will become much more expensive - we believe that UK retailers have only hedged insufficiently. Trade barriers and tariffs might also be erected adding even more to consumer prices. Rising prices will dampen demand.
Secondly for British shoppers there is less money going round. Another round of belt tightening will be on the agenda, driven by a crash in consumer confidence, a falling housing market, more bankruptcies, unemployment going up and wages falling again.
The big unknown is what will happen to EU citizens in the UK. We would expect a substantial amount of EU citizen to leave due to employment moving abroad (banks, insurance, law firms etc). Perhaps stricter retroactive visa requirements for low paid EU staff in warehouses, factories and on farms would force many to emigrate. If this happens, from an operations standpoint there will be real headaches in the supply chain, but perhaps more importantly in terms of spend the major worry is the addressable shopping pool being shrunk. Mass EU emigration and the loss of purchasing power on a greater scale could not be offset by retailers in the UK (or by returning British ex pat OAPs from Spain).
And at this point the BoE will be forced to raise interest rates, as UK inflation starts to soar, the oil price recovers ...