What would a no-deal Brexit mean for online retailers?

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What would a no-deal Brexit mean for online retailers?

24 August 2018 by Chloe Rigby

 

The Government this week issued technical guidance on what exporters will need to do should there be a no-deal Brexit. That advice comes in the week that the Government has launched an export strategy targeting 35% of GDP from exports in coming years. With many now giving a 50/50 chance of the UK leaving the EU without a deal, it looks like it’s time to start planning.

 

ONLINE TRADE

Exports are long been key to online and multichannel retailers in search of growth, and exporting to Europe is the one of the easiest markets to serve since currently there are no tariffs to pay on sales and delivery times are fast.

 

The EU is a key market for retailers such as fast fashion pureplay Asos, which makes most of its sales overseas. Its latest figures, for the four months to June 30, show that 64% (£514.7m) of its total £802.7m retail sales came from international markets. The EU was the largest of those markets: sales of £257.4m accounted for a solid 50% of its international sales.

 

The latest IMRG MetaPack UK Delivery Index, out this week, suggests that European orders were an important part of the 15.2% growth it saw in the delivery of online orders in July in what Andrew Starkey, head of e-logistics at IMRG www.imrg.org,says 2018 is proving a “solid year” for online delivery growth.

 

He added: “With European shoppers apparently taking advantage of the strength of the euro against sterling, and UK shoppers wanting to make the most of the hot summer, it’s only the on-time delivery rate (90%) that remains a concern over the coming months as we approach the peak shopping season.”

 

HOW WOULD A ‘NO DEAL’ CHANGE THE WAY RETAILERS EXPORT TO EUROPE?

The Government’s guidance on trading with the EU if there’s no deal, out this week, says that the major changes will be to customs and excise duties.

 

No deal would mean that there is no EU free trade agreement and trade would be on World Trade Organisation terms that would apply set ‘most favoured nation’ tariffs to consignments sent between the UK and the EU. What individual tariffs are will depend on what retailers are selling. Currently the UK’s proposed post-Brexit WTO schedule is being reviewed in a three-month consultation among members. After that, the UK schedule, which replicates existing EU commitments, will be deemed approved if there are no objections from WTO members. However, it seems likely that there will be objections from markets including the US and Australia.

 

This week’s UK Government no deal guidance suggests that exporters – which include online retailers selling abroad – make sure they are planning at all levels for the likely changes to these duties. They’ll need to consider how their supply chains might be affected, and may need to renegotiate existing contracts in the light of any changes to customs and excise procedures. Hiring suppliers such as customs brokers, freight forwarders or logistics providers may help, as may taking on HMRC-authorised customs warehousing in order to delay duty payments until the goods are sold. Northern Irish businesses that export to Ireland “should consider whether you will need advice from the Irish government about preparations you need to make”.

 

Exporters and importers will need to register for a UK Economic Operator Registration and Identification (EORI) number. They will need to update their contracts and international terms of service to reflect any new status as an importer or exporter, and they may need to apply for import or export licences and will need to pay VAT and import duties as well as recording exports, including through safety and security declarations.

 

Businesses that sign up for the HMRC’s EU Exit update service, available here www.gov.uk/government/collections/hmrc-webinars-email-alerts-and-videos via the ‘register for business help and education emails’ link, will be notified when the EORI service becomes available.

 

HOW LIKELY IS THIS TO HAPPEN?

The Government is clear that no deal is not a scenario it expects to come about – but over the summer the likelihood of no deal has been put at about 50% by individuals and organisations from the Latvian foreign minister to the EU , while UK foreign secretary Jeremy Hunt has warned of an accidental no deal. That suggests retailersshould strongly consider preparing for this scenario.

 

WHAT THE INDUSTRY SAYS

An EU deal is essential

Helen Dickinson, chief executive of the British Retail Consortium:

 

“Businesses can only plan based on the facts and securing a deal with the EU is essential to provide certainty and to protect UK consumers. Our food supply chain in particular is fragile and based on just in time principles, ensuring efficiency and economies of scale, bringing huge benefits to the British shopper.

 

“Any delays caused by increased red tape will have a serious impact on over one-third of our food imports. The Government’s technical notices demonstrate the facts of a No-Deal Brexit – reduced availability and higher prices of food and medicine, increased delays and red tape at borders, and a VAT bombshell for consumers and businesses.

 

“EU and UK negotiating teams must deliver a Withdrawal Agreement in the coming weeks to avoid the severe consequences that would result from a cliff edge scenario next March.”

 

Warnings are equivalent of UK ‘duck and cover’ nuclear warnings

David Jinks, head of consumer research, at parcel delivery specialist Parcelhero

 

“The advice that people and businesses shipping items to the EU should ‘engage the services of a customs broker, freight forwarder or logistics provider to help or alternatively secure the appropriate software and authorisations’ is reminiscent of Government advice to ‘use tables if they are large enough to provide you all with shelter from 1980’s Protect and Survive government booklet.

 

“The European Commission recently warned increased border controls will mean transport between the UK and EU will be ‘severely impacted’ with the possibility of ‘significant delays’. The technical notice’s assertion that the Government will have stockpiled six week’ worth of medical supplies to cope with border disruption simply creates more worries than it calms. If that’s the level of delays anticipated for urgent medicines, what will the situation be like for normal goods. If individuals and SMEs are simply planning to send a parcel t the EU or expecting a parcel collection from the continent, we can get a picture of the real delays anticipated.”

 

Retailers left to fend for themselves

Dan Ennor, commercial director at Global Freight Solutions

 

“It should come as no surprise that the Government would leave establishing trade strategy within the EU, post-Brexit, up to the individual business. Now that retailers are going to be responsible for determining their own delivery structure, delaying the inevitable will do more harm than good, in an already volatile retail market. However, with the right delivery infrastructure which is seamless and transparent, Brexit can be an opportunity for international growth.”

 

“New tariffs and stricter border controls will likely increase the cost and delivery time for both customers and companies, and if UK businesses continue to be so heavily reliant on EU trading, their profit margins will take a hit and supply chains will be slower. As such, organisations would do well to start targeting emerging regions of rapid ecommerce growth outside the EU. Companies could see major growth to their businesses if they have the right approach and partner to help maximise their success in these regions.

 

“While the complexities that international expansion presents can be overwhelming, retailers who implement a transparent delivery strategy that takes into account, taxes, duties, dispatch speeds and convenience for customers, stand to win post-Brexit. For example, our partnership with Hattons Model Railways has helped streamline their carrier offering, and fuel their expansion into three new international marketplaces, one being the US. Delivery fulfilment has been boosted by 40% and they expect a projected annual revenue increase of 50%, all as a result of investing in the right delivery approach.”

 

Image: Fotolia

Original source: InternetRetailing

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