Updated: Feb 4
Brexit negotiations have been going on for years, which finally at 1. January 2021 were effectuated. However, planning for what Brexit would mean to trade between UK and other countries, has been almost impossible.
In this short post we have highlighted some of the Brexit consequences for selling online from the EU to UK:
On the positive side, trade between EU countries and UK, will not be restricted by quotas or taxes as long as the traded goods are manufactured in EU.
The reality is though, that a lot of goods are manufactured outside of EU and therefore taxes will be applied when shipped to UK.
Taxes vary on different product groups, and even if only some of the product value is manufactured outside of EU, this will be calculated and taxed accordingly.
UK's previous rule of VAT free imports on products below 15GBP is also removed, so VAT (currently 20%) is paid on all sales. VAT registration in UK is now also required.
Credit card fees to quadruple?
Mastercard recently announced that they will increase the fees by at least 400% from 0.3% on credit card payments and 0.2% on debit card payments to 1.5% and 1.15% respectively on payments from the European Economic Area (EEA is all EU countries + Iceland, Liechtenstein and Norway) to the UK. Why? Well, because they can: Since 2015, the EU has capped these fees across the EEA countries, including within the UK. But now, card issuers apparently can set the price themselves, and that could turn out to be very expensive for the selling party.
[UPDATE 4th February] Customer experience The first impressions from January 2021 shows that customers in UK buying from EU based stores had a rough start. Brexit has caused absolute chaos with serious delays, problems with paperwork and goods being returned to sender at the border. Due to this, one of our clients had delays of up to 3 weeks from the order being placed to being delivered.
As a result this client saw a +260% increase in customer service contacts (from 0,4 contacts per order to 1,44), as customers were asking for their order's status and for refunds. This is a terrible customer experience, and very expensive for the seller to handle.
Should I start selling in UK now?
Historically, UK has been one of the toughest e-commerce markets to enter in many years. Although the demand-side is very strong, UK has always been one of the first markets to enter for brands and webshops from around the world. With the extra hassle and costs involved in doing business with UK currently, it would be worth considering other large European markets inside EU as an alternative, unless there's a special opportunity or gap in the UK market for your product. Hopefully over time better trade agreements will be gradually introduced between EU and UK. Consider a Market Scan to find the best fitting market for your shop/product.