What Impact Would Brexit Have on International ECommerce?

Ever since the United Kingdom voted in 2016 to leave the European Union, political uncertainty has exploded. Some commentators have practically made their living guessing on the changes that will come to Europe and the rest of the world. A key part of this comes from economic effects.

The United Kingdom represents the biggest eCommerce player in Europe and provides an important port of entry for much of the rest of the world. If Brexit moves ahead as planned, it cannot help but impact eCommerce on the continent and across the globe.

Customs and Tariffs

Agreements among EU member nations include measures to reduce or eliminate tariffs and customs charges for commerce moving across their borders. As a member nation, the UK gains the benefit of cheaper imports for its citizens. In addition, its companies gain export sales because customers in other countries don't have to pay more to bring those products in.

When the UK finalizes Brexit, those benefits go away. This will almost certainly result in increased costs on both sides, making it more expensive both for some countries to export to Britain, and for British companies to export their products. As prices go up on both ends, it cannot help but slow down the flow of goods in and out of the UK.

Depreciation of the British Pound

Brexit has also ushered in depreciation of the British pound. According to the BBC, over the last two years, the pound has fallen significantly against other currencies. This makes imports into Britain more expensive. Not only does that reduce direct imports, it also impacts the cost of raw material imported to the UK, required to produce the products they sell in their own market.

On the other hand, a weaker pound makes exports to other countries cheaper. Products that are subject to lower tariffs can represent great value for those in other countries importing British goods. Unfortunately, though, Brexit is part of a larger nationalistic trend across the globe, so tariffs applied by other countries look to be rising, not falling. The number of exports to which these price advantages apply will likely continue to drop.

Uncertainties Remain

This potential reflects perhaps the biggest impact of Brexit: Uncertainty. ECommerce trends depend on prices, added costs, and relationships among different countries. Right now, the UK is still trying to work out many of the details of its Brexit strategy, even with decision deadlines either looming or past. Questions abound, with Parliament generally unable to agree on any proposal.

Payment and delivery options today create almost limitless channels for goods and money to flow. Transactions are growing year after year and will continue to do so. The problems that Brexit has created will not destroy international eCommerce.

Still, it will take time for Europe and the rest of the world to adjust even after the dust settles. Once it does, the opportunities available to other countries and their companies will become clearer, and eCommerce will surge ahead again.

What Impact Would Brexit Have on International ECommerce?

About the Author

Rod Katzfey, EVP, Integrated Payments

Rod has over 25 years of progressive experience in electronic payments and banking, with a focus on International and US domestic processing. He remains active by serving on corporate boards and taking speaking engagements. Rod previously served as Credorax’s SVP of Business Development & Sales for North America.

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