The Impact of Brexit on eCommerce
The Brexit debate continues to be one of the most analysed and divisive political events in recent times. As the deadline to leave the EU looms ever closer, the overarching feeling is one of uncertainty for British ecommerce businesses and overseas senders.
This week, an article 50 extension agreement has been reached to delay Brexit beyond March 29th. This extension is in place to allow Theresa May sufficient time to present her third deal to Parliament.
Here's What You Need to Know
- Should the Prime Minister’s deal be accepted, the UK will exit the EU on May 22nd - with the agreed deal in place.
- Should the deal fail to get through Parliament, the UK will have until April 12th to propose a new plan.
- Failing that, a no deal Brexit will be the default outcome – though this prospect has been roundly dismissed as a viable option by MPs in previous votes.
- In the event that MPs refuse to back a deal but stand firm on opposing a no deal scenario, the prospect of a major renegotiation with Europe will then come to the fore.
- In this case, one of two outcomes will carry through:
- UK and EU renegotiate: a new deal is presented to and passed by Parliament, agreed by all parties and implemented.
- EU refuses to renegotiate: the UK will be left with no alternative but to go with one of the options already on the table.
As has been outlined above, for businesses selling online, the greatest challenge currently posed by Brexit is the task of preparing effectively for an unclear eventuality. The UK’s annual revenue from online retail and ecommerce is currently more than €150 billion; and with Great Britain accounting for 33% of all online sales in the EU, the Brexit vote has the potential to majorly disrupt current market trends on both sides of the English Channel.
As the largest online market in Europe, the UK has had a leading role in the success of European ecommerce since the rise of online shopping. Equally, the tech boom and the emergence of British ecommerce have evolved hand-in-hand with access to the barrier-free trade EU membership ensures. Will the changes Brexit introduces hamper the UK’s flourishing ecommerce industry? – and how will the withdrawal of the EU’s biggest online market impact its economy?
Here at Parcel2Go, we thought we’d put together some practical advice for online businesses and overseas senders on what Brexit may mean for them.
This means the UK will leave both the single market and the customs union. Pre-referendum, the Conservative Government predicted that this would cost £11bn in new tariffs and cause a 30% rise in costs for some imports. However, the change could also create opportunities for British exporters.
What to Expect
- A hard Brexit will cause significant disruption to businesses in the short term. Currently there are no tariffs, taxes, or clearance charges to be paid or custom check forms to complete when exporting/importing within the EU.
- The introduction of such measures would both complicate and delay European trade for businesses.
- As it stands, British ecommerce businesses can freely contract workers from any EU member state. In the case of a Hard Brexit or No Deal scenario, visa requirements to employ the same workers would make it increasingly difficult to outsource necessary business functions like multilingual customer service.
- On the other hand, while British high street stores may suffer a dip in domestic consumer confidence, marketplace platforms could flourish in this climate.
- In the years following the 2008 recession, eBay saw a significant swell of UK online entrepreneurs successfully making money on the platform.
In this scenario, the UK would stop short of a ‘full’ withdrawal from the EU. The short-term economic ramifications of leaving the EU would be minimised.
What to Expect
- UK would retain strong ties and a close working relationship with the EU – such as remaining within the European Economic Area.
- This would likely hinge on the UK’s agreement to accept the four freedoms along with ECJ jurisdiction but would preserve mutual market access and avoid trade barriers.
- Depending on how the agreement was negotiated, Britain would either remain under its current privileged trading status with the EU or be given time and a period of assured economic stability to fashion a new trading relationship with the EU single market under WTO rules.
Impact on Shipping
- Following the referendum, the value of the pound immediately dropped against other major currencies.
- While this has caused imports to the UK to become more expensive, British exported goods have become cheaper to European consumers.
- Buying from UK-based ecommerce businesses will lessen this impact for UK customers.
- For anyone importing commercial goods from outside the EU – including Britain - they will need an Economic Registration and Identification (EORI) number.
- Currently goods don’t have to wait at the border for VAT to be paid. With a Soft Brexit, there would still be no VAT charges; however, in a Hard Brexit scenario, VAT is due before goods can be released.
- This could increase shipping delays and will likely lead to increased costs to account for border control complexities.
- It is likely that courier services will require more information about a parcel’s contents –producing and attaching relevant forms and labels to accompany the parcel.
- These extra procedural steps will increase both costs and resource for UK ecommerce businesses.
Relevant Information for Sending Overseas
At this point, there is still a big question mark over the outcome of Brexit. To assist with planning, we've compiled a checklist for online businesses, ecommerce companies and overseas senders to bear in mind before shipping.
In a No Deal / Hard Brexit scenario, customers sending parcels from the UK to EU countries should be aware of the following:
- All goods will need customs clearance
- All senders to EU countries will now be required to complete a commercial invoice
- Goods sent across EU borders would be liable to duties and taxes
- Increased procedural requirements will result in delayed transit times