In a few weeks, June 23, 2016, the UK will vote on whether to stay in the European Union or leave it. There’s a lot of debate about the implications of leaving the EU, ‘Brexit’, and one of the key areas that would be affected is trade between the UK and the rest of Europe, an important issue for online sellers. We’ve taken a quick look at some of the reasons for and against leaving, and how the outcome of the referendum could affect ecommerce businesses.
Arguments for leaving the EU
Those that want to leave believe we give too much money to the EU, and that it has too much power over our laws and regulations, as well as concerns over immigration from other EU countries. It’s claimed that leaving the EU will result in an immediate saving of money - last year the UK paid £13 billion to the EU, and received £4.5 billion. They also argue that trade with EU countries would continue in the same way, because the UK imports more from the EU than we export to them.
Arguments for staying in the EU
Europe supporters believe that leaving the EU would have a negative effect on the economy, demonstrated by the pound falling to a seven-year low against the dollar earlier this year. It’s argued that the UK benefits from trade deals between the EU and other world powers, and outside of the EU we would have to negotiate such deals on our own - which could leave us better or worse off. To continue trading in the same way, the UK would probably still have to follow EU rules to retain access to the single market.
What could affect online sellers
Currently online sellers in the UK are able to sell to the 27 other countries in the union without having to pay import duties or tariffs. Europe is a key market for ecommerce, especially small online sellers, as there is an accessible potential customer base of over 500 million people.
According to a report by Volo Commerce, Western European markets make up over 50% of the export destinations for UK-based online sellers - France and Germany between them account for 40% of the exports for UK online retail SMEs.
If the UK leaves, then it will most likely become more complicated and more expensive to ship items to European countries. This could include taxes and customs charges that are usually only applicable when you send items outside of the EU. In some non-European countries online sellers find that buyers won’t go above tariff/duty limits; the maximum amount you can purchase before having to pay additional costs to import the goods.
The EU is also currently working on Digital Single Market legislation, which aims to make cross-border trade between EU countries easier. This legislation would also aim to make shipping more efficient, and simplify VAT across the EU. Outside of the EU, the UK could be excluded from this legislation, and miss out on the potential benefits.
Philip Rooke, the British CEO of Spreadshirt, an international ecommerce company selling personalised clothing based in Berlin, believes that the impact for ecommerce would be negative if we leave the EU: “For me, leaving the EU would be a disaster for UK ecommerce and internet brands that want to compete in a global market. It would leave them isolated.
“The open borders of the EU are particularly important for online retailers, which can benefit from three things; freedom of movement, the size of the market, and, perhaps surprisingly, less red tape.”
If the UK does vote to leave the EU there will be a 2-year exit negotiation period, during which EU laws will still apply to the UK. This means things won’t change immediately, and there could be a long time of uncertainty about what the actual outcome and consequences of leaving are. There are number of other areas aside from trade that need to be considered when deciding which way to vote, but for online sellers leaving could affect the ease of expanding abroad and attracting EU-based customers, as well as the efficiency and cost of selling and shipping to other European countries.
For more information about the EU referendum take a look at these links:
- UK and the EU: Better off out or in?
- What impact would a UK exit from the EU have on ecommerce?
- The economic consequences of leaving the EU
- Will the 'Brexit' bruise UK ecommerce?