After many months of gruelling discussions, the UK finally reached a Brexit trade deal in December 2020. Brexit affected many aspects of UK life, from travel to business. In particular, Brexit impacted e-commerce, affecting business within the UK and the EU.
New restrictions and rules outlined in the Brexit trade agreement impacted cross-border trading and domestic online sellers significantly.
With more consumers now shopping online than ever before, e-commerce businesses must ensure that they are compliant with Brexit regulations and how this could impact their trading strategy in 2024.
In what ways did Brexit affect e-commerce?
The UK is the largest e-commerce market in Europe, with 93% of the UK population buying online. The UK has the largest e-commerce market in Europe. The most prominent players in this market include companies such as Amazon, Tesco, and Asos.
The market grew steadily from US$308 billion in 2017, reaching a peak of US$649 billion in 2021. However, 2022 saw a decline to US$590 billion. The forecast indicates a rebound in 2023, with revenue expected to grow to US$621 billion. It’s projected to set a new peak in 2024, reaching US$658 billion.
The long-term outlook remains optimistic, with the market anticipated to reach US$755 billion by 2027. This suggests that despite short-term fluctuations, the general trend for eCommerce in Europe is upward.
With the UK now second to China as the most popular e-commerce market for Europe, UK e-commerce could experience a decline in European sales as a result of trading changes and, likewise, the rules could prevent UK buyers from purchasing within the EU.
Here are the fundamental ways in which Brexit impacted e-commerce across Europe:
Longer shipping times
With freedom of movement no longer in force, more stringent customs regulations are in place, which could delay the speed at which packages leave and enter both the UK and EU. Businesses trading with the EU will be required to obtain an Economic Operators Registration and Identification (EORI) number. This number is mandatory for businesses looking to move goods across borders and can help customs process packages more quickly.
Customs duties
Whilst the Brexit deal ensures tariff-free trading between the UK and EU on most goods, UK consumers will have to pay customs duties on items more than £390 in addition to potential VAT and handling fees on certain items. The additional costs could deter UK buyers from European online purchases, potentially encouraging them to turn to domestic online sellers.
Which types of e-commerce businesses are affected by Brexit?
There are a variety of e-commerce businesses that are impacted by new Brexit trading regulations, which include:
EU businesses selling to the UK
From 2021, EU businesses selling to the UK are required to file a tax return in the UK and state the EORI number to allow products to be shipped over. The tax changes mean that EU businesses are forced to pay increased costs, with VAT now being collected at the point of sale instead of the point of importation. The new rules have since led multiple businesses within the EU to refuse deliveries to the UK, including bicycle company Dutch Bike Bits and Belgium beer firm Beer on Web.
Global businesses selling to both the UK and EU
Pre-Brexit, it was a straightforward process for global firms who sold to both the UK and EU. However, the UK’s new independence now means that global companies have to adhere to two sets of shipping rules. Global firms must, therefore, ensure that their international shipping strategy is both efficient and compliant.
UK businesses selling to the EU
Brexit trading rules have caused great uncertainty amongst many UK firms, triggering many to cancel deliveries to the EU, including ASOS, John Lewis and Fortnum and Mason. The last-minute Brexit trade deal meant that firms could not fully prepare for the new rules that took effect on 1st January 2021. The most notable change is the ‘rule of origin’, which means that goods produced outside of the UK and EU to be then resold by UK firms are now subject to VAT and import duties if sold to the EU.
UK businesses that import goods from outside the UK
From 1st January 2021, many UK firms encountered staffing issues regarding their order fulfilment. A study conducted by the BBC revealed that 19% of EU migrants work in warehousing. As a result, UK businesses that import part of their supply chain from outside the UK could struggle to source future employees.
Given that we are still in the early days of Brexit trading rules, it’s difficult to forecast how severely e-commerce across Europe will be affected in the longer term.
Some facts to consider for 2024:
- The value of goods imports increased by £3.6 billion (8.2%) in October 2023, with rises in imports from both EU and non-EU countries.
- The rise in imports was mainly the result of greater imports of machinery and transport equipment from both EU and non-EU countries.
- The value of goods exports increased by £0.4 billion (1.2%) because of increased exports to non-EU countries, while exports to the EU decreased.
- The total trade in goods and services deficit narrowed by £2.3 billion to £9.2 billion in the three months to October 2023, the result of a substantial fall in goods imports.
- The trade in goods deficit narrowed by £2.1 billion to £47.3 billion in the three months to October 2023, while the trade in services surplus widened by £0.2 billion to £38.1 billion.
At Pointbid, we offer efficient order fulfilment solutions to clients in both the UK and internationally. If you would like to know more about how to gain a slick e-fulfilment strategy amid these uncertain times, please give us a call on 0121 326 7368.
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