U.K. exit creates uncertainty for e-commerce
U.K. left the EU with the majority of near 52% of the population. The impact of that exit is expected to be detrimental in the short-term for e-commerce businesses in the U.K. and EU. The market anticipates changes in tax structure to impact prices for companies and customers, fluctuating financial markets to limit the funding options of companies, and uncertainty regarding new policies to affect product delivery time and costs.
With the exit decision made, the U.K. will now have a two-year time frame as per Article 50 of the EU treaty to figure out the exact terms of its departure. However, negotiations regarding the future trade relationship with the EU is likely to take much longer — economist Gregor Irwin expects it would take 10 or more years — and create a period marred with uncertainty until the final trade agreements are announced.
With western European markets representing over 50% of UK e-commerce exports a primary concern is that U.K.’s exit from the EU could result in increased tariff & non-tariff barriers for U.K. e-commerce retailers while trading with the EU. Changes in tax structure would certainly impact the tariff of both imported and exported goods by the UK.
A new relationship between the U.K. and the EU could follow several models, but negotiations will likely result in a “free” trade agreement, or Swiss-style model containing bilateral agreements. Either of which would still contain compromises and impose sizeable costs.
Far reaching implications
U.K.’s exit represents even more subtle, gradual, regulatory uncertainty for e-commerce retailers. Exit from the EU will also usher in regulatory divergence that increases over time, affecting trade volumes and potentially reducing the attractiveness of the U.K. for investment.
This is a potential economic blow to international companies across the Americas, Middle East and Asia that have looked to the British market to grow their brands and provide a pathway to EU consumers. Chinese and U.S. e-commerce retailers particularly viewed the U.K. as a window to Europe, but if that window is now barred, innovative programs like Jack Ma’s eWTP may have to wait.
Nonetheless, while U.K.’s exit may destabilize the country, affect currencies, and change the trading relationship with the rest of the continent, all expect the U.K. to retain a role in the digital cross border e-commerce conversation within Europe, albeit adding an extra layer of complexity in terms of compliance.
Here’s what GES2016 speakers have to say
So what’s the real fall-out for e-commerce from the U.K. severing ties with the EU? E-commerce professionals have differing views on just what the U.K.'s exit will mean. Hop over to the Global E-commerce Summit website for a running roundup from this year’s Global E-commerce Summit speakers.
Tags: Regulatory environment