SPAR, TFG, Truworths and Steinhoff may be recalibrating their offshore strategies after the UK vote to leave the EU. While the impact of Brexit is still an unknown quantity, analysts expect times to get tough.The expansion of well-known food and fashion retailers into the UK and Europe in the past few years includes Truworths's purchase of Office Retail Group for R5.5-billion in November last year.Spar, which owns the brand in Ireland and England, bought 80% of BWG Group in August 2014, and last year TFG (formerly The Foschini Group) bought 85% of Phase Eight in the UK for R2.6-billion.Wayne McCurrie, a senior portfolio manager at Momentum Wealth, said this week that any South African business operating in the UK - be it retailer, hospital group or, particularly, listed property company - would see share prices knocked and, economically, have a torrid time until the uncertainty is resolved.story_article_left1"It's not the issue of Brexit itself. At worst, it means that Britain will have to trade with the EU on the same terms as everyone else. The eventual economic effect on the UK will be marginally negative. It's not as if the UK is going to be ex-growth for the next two decades because of this, but it's the consequences of this vote between now and when everything is finalised - what this actually means for people."The uncertainty is the actual problem. [When] everyone knows what the playing field is, there won't be as many negative issues as what we see now. The problem is we don't know."McCurrie said no one would commit to major financial obligations until there was certainty. "And consumers will be cautious about spending and investing." The UK economy is likely to head into recession, and the pound has collapsed about 10% against the dollar since the vote. "It's not inconceivable that another referendum is called to clarify the terms and conditions, or even a general election is held."For South African retailers, earnings from the UK would be 20% less than six months ago, said McCurrie. "Automatically, the earnings are down because of the weaker pound. And the actual earnings are under pressure because of the UK recession, although over the next few years it will be sorted out."But some retailers may fare better than others.Chris Gilmour, an investment analyst with Absa Wealth & Investment Management, predicts Spar will be in the pound seats. It operates in three jurisdictions outside South Africa "and I don't think those operations will be that badly hit. They're in a nondiscretionary area - food."Switzerland, where it also operates, has seen its currency strengthen. "Their earnings when translated into rands will be better."A spokesman for Spar said the fallout from Brexit "and the implications for our business will take time to assess and digest".Steinhoff, whose brands include Harveys and Bensons for Beds in the UK, Conforama in Europe and HiFi Corp and Incredible Connection in South Africa, could face a more challenging time.story_article_right2"If anyone's going to be badly impacted, surely it's going to be Steinhoff," said Gilmour, who expects Europe to be hit much harder than the UK - and Steinhoff is heavily involved in Europe as well as the UK.Charles Allen of Bloomberg Intelligence said the most obvious risk was that the UK had some sort of recession and that Europe also weakened. "This would likely affect the reported sales and potentially profits of Steinhoff and Spar."And what of Steinhoff's possible bid for the balance of UK retailer Poundland that it does not already own?Allen said rather than proceeding rapidly to a full offer for Poundland, Steinhoff may decide to wait and see what happened to the UK consumer.According to the Daily Telegraph in London, it is not going to be pretty. It reported that Brexit could not have come at a worse time for the high street, as many retailers were already contending with thin profits as sales slumped and footfall dropped.Fashion retailers were most at risk from Brexit fallout as they bought a significant amount of goods overseas and paid in dollars, according to the Telegraph. This meant they would be knocked by rising import costs from the weakening pound. The threat of trade tariffs with EU countries was another concern.But Anthony Thunström, chief financial officer of TFG, said that while a level of volatility in the region and global markets was expected in the short term, "we're not unduly concerned for our two UK investments, Phase Eight and Whistles".Phase Eight is an upmarket boutique chain catering to women over 35. It has 542 outlets in 23 countries. Whistles, a contemporary British fashion brand for men and women, has 121 outlets in five countries."Customers of both Phase Eight and Whistles are generally more affluent, and therefore less likely to be impacted by negative consumer sentiment," he said. While both businesses are headquartered in the UK, neither is a purely UK business."Therefore, should any head offices be relocated to Europe, they will inevitably relocate to a position where we already have a presence."Finally, even before the tremor that was the Brexit vote, TFG had anticipated and planned for this year's expansion to come predominantly from outside the UK from both EU and non-EU countries."In South Africa, companies were robust and experienced in dealing with volatility , he said. "So for us at TFG, Brexit will be taken in our stride, and its repercussions managed as we manage other business change," said Thunström .Truworths declined to comment.Franziska Schmidt, retail analyst at Planet Retail, said the impact of Brexit for South African retailers in the UK depended on the partnership the EU and the UK negotiated.story_article_left3"Should the EU act tough and deny the UK free access to its single market, the latter surely will try to strengthen trade relations with other markets. This obviously would provide a chance for South African retailers to try to deepen trade relations with the UK."Schmidt said, however, that markets other than the UK might look more promising for South African retail investors at the moment.She added that among the biggest problems in the long run was the potential fragmentation of one of the largest single market, as the referendum might give fresh impetus to separatist movements in several other EU member states. This might reduce the EU's attractiveness for retail investors, for example those from South Africa.In real terms, Planet Retail predicts retail sales in the UK to be flat this year and to shrink by 2.5% to 3% in 2017.But even with the headwinds South African retailers now face, their expansion is expected to pay off in the long term.Gilmour said expansion offshore was "the right strategy to follow. They're world-class operators, they need room to breathe. They've seen a market where they've had foreigners like Cotton On and Zara come in and attack the market. And local consumers are under relentless pressure."shevela@sundaytimes.co.za..