Online cross border or international shopping is popular in Britain with 36% of shoppers saying they have shopped from online shops in other countries in 2015, according to a recent PayPal* survey. Alibaba, Amazon, eBay and Etsy being among the more popular.
Brexit Summary for international shoppers.
- Sterling could depreciate 20%** making international shopping more expensive.
- Potential loss of free trade area with EU means increased import duty.
- 20% VAT applied to EU purchases.
- Loss of EU consumer protection directives.
Rising numbers of ecommerce websites in India and China, where many people buy inexpensive clothes, jewellery and other goods and shoppers with a penchant for USA products, such as tech and gadgets, international shopping is only set to increase in the UK, so how will Brexit affect cross border shoppers’ wallets?
We are taking a look at some of the things that will be affected if the UK leaves the EU.
Firstly, exchange rates. In February Goldman Sachs claimed that GBP could fall by 20%** if we leave the EU to levels not seen since 1985. This weakening of the pound will mean that shopping bought from overseas will be more expensive as you effectively get less for your money. Anyone who shops online from shops and websites in other countries will see a steep rise in the cost of their shopping if Sterling does depreciate.
It would mean, though, that products sold in the UK would be cheaper to overseas shoppers. Something that would be good for UK shops selling to customers overseas, such as ASOS and Boohoo which have large international operations and many loyal customers in countries like Australia.
Secondly, import duty and VAT. Currently if we buy goods and services from countries within the EU there is no import duty or VAT to pay because it’s a free trade area. This would likely change as import tariffs are introduced and renegotiated post Brexit. If you shop at websites outside the EU you have to pay import duty on anything with a value, including the shipping and packaging costs, of over £135, if the item is a gift then 2.5% is charged for values between £135-£630. For values over £630, import duty is charged according to the product’s trade tariff commodity code. Goods are classified according to things like what they are made of and what they are used for, and import duty is applied to each product as a percentage of that good’s value.
VAT is charged at standard UK VAT rates, usually 20% on purchases from outside the EU if they are worth over £15 or gifts worth over £34. Trade tariffs are likely to be negotiated on a country by country basis, so it is impossible to know at this stage what the net effect would be, some will go up and some down. But, some argue that independent UK’s lack of scale compared with the economies of scale when combined with the rest of EU means we may have to accept higher trade tariffs than we currently have.
Peter Mandelson, a member of the previous Labour government and now a lord, has warned that the UK would be forced to push up import tariffs in retaliation, increasing the cost of imports, and the price of international shopping, while new trade tariffs are negotiated. And it will take time to negotiate a deal, it took Canada 10 years to negotiate and implement a deal with the EU called The Comprehensive Economic and Trade Agreement (CETA)***
Thirdly, the last area is consumer protection. When you buy goods or services from abroad, you are covered by the legislation of the country where the seller is based. So if we buy something from the EU we are covered by EU wide consumer protection directives. This will not change, but EU directives are designed to protect consumers within the EU.
Once the UK is outside the EU there will be no guarantee that EU shops will abide by them for shoppers in the UK and it may be more difficult to get redress should a purchase from an EU country go wrong. Whilst it is difficult to know exactly what will happen for international shopping should Brexit occur, it is likely that in the short term at least cross border shopping will be more expensive and onerous for consumers.
Nick Beeny founder or MyInternationalShopping.com says “many shops from the UK, and all over the world, are growing their international sales and it is clear that Brexit could have a large impact on these, at least in the short term”
*Paypal Global Report 2015
**Goldman Sachs Sterling Forecast
***Canada and EU trade deal, CETA.