The UK is set to officially leave the EU 2 years after triggering Article 50 of the Lisbon Treaty, which no sooner than 2017, according to the BBC. If the UK and the EU don’t reach an agreement, standard trade tariffs set by the World Trade Organization will apply by default. What does all this mean to Amazon sellers?
The outlook for Amazon sellers across Europe, and in the UK, in particular, is not a positive one. The UK economy has deteriorated in July, BBC claims, and that’s bound to affect European and global economy. But let’s keep in mind that this is a first, and we have no way of knowing what new opportunities may lie ahead for businesses like Amazon or third-party sellers. What we do know is that there are some internal and external effects:
INTERNAL FACTORS
| Currency, prices and business cost changes | Who benefits |
|---|---|
| The pound has plummeted since the referendum, making imports more expensive for all the goods and services produced in the EU or the 50+ countries that have trade agreements with it. | For Amazon artisans and sellers of products made in the UK, this could be helpful. |
| A weaker pound translates into .higher inflation rates, which means a rise in prices is sure to follow | Only Amazon sellers who find a way to reduce their prices will stand to gain. |
| Exports are more profitable now, but they may be offset soon by increasing costs and/or a decline in demand. | Amazon sellers who produce goods in the UK and sell internationally could find this helpful. |
| A decline in consumer spending is also to be expected, The Independent reports, so businesses like Amazon are likely to suffer because of cheaper competitors like eBay. | This could bring hope to Amazon sellers who trade essential goods or relatively cheap items. |
| When the UK leaves the EU, British people will no longer be able to set up companies on the continent, unless they gain European citizenship. The same applies to EU citizens. That means Amazon sellers may find it harder to open warehouses and subsidiaries across Europe. | Existing Amazon sellers may have less competition, but new ones will have fewer opportunities to grow. |
Some local banks believe that the UK will experience a shallow recession, in spite of all the efforts the Bank of England is putting into keeping inflation and mortgages down.
EXTERNAL FACTORS
| Trade, VAT, Customs and Transportation Changes | Who benefits |
|---|---|
| A ‘free circulation’ deal like Turkey’s, which is the best-case scenario, BBC claims, only applies to products made entirely in the UK and the EU, and that includes the raw materials used in producing them. Even so, compare trade profiles, and you can see how much smaller the EU’s tariffs are, as compared to Turkey’s. | European Amazon sellers who only trade ‘100% made in the EU’ goods are the only ones who stand to gain. |
| The sale of goods to EU customers may become VAT-free with a new agreement, but import procedures and costs could make buying products on Amazon.co.uk less attractive, ParcelHero's Brexit Report says (customs duties explained on p. 14). | Amazon sellers who can set up warehouses and outsourcing operations in the EU may be able to keep prices down and take advantage. |
| The VAT Consultancy claims some VAT rates could stay the same, and the zero rate applicable to books and others can be extended. But VAT may rise at some point, to counter an economic decline. | All EU-trading Amazon sellers would see profits decline, but non-EU sellers could benefit. |
| EU-trading Amazon sellers would need to pay VAT upfront at the border, instead of paying at the end of the financial year, along with all their domestic VAT. | European and EU-trading Amazon sellers may have cash-flow trouble, balancing competition with non-EU sellers. |
| Expect more paperwork proving how and where the products are made, and more effort going into showing the relevant papers to all the customs offices involved. | Amazon sellers importing from outside the EU will welcome the change, because it levels the playing field. |
| There would be customs delays with all the new paperwork required (like import and export declarations), leading to higher customs clearance costs. Standard customs clearance charges applied by international couriers like DHL for importing non-EU goods are about £15, says ParcelHero. | Customs delays and costs affect delivery times, meaning that every Amazon seller will need to work harder. No-one stands to gain. |
| Checking goods before and after crossing the channel, takes more time and money. This, in turn, would increase transportation costs for all of the goods that don’t travel ‘par avion’. | All European and EU-trading Amazon sellers will see the bottom line shrink, but other may profit. |
| Amazon’s PAN-European FBA distribution would be hindered. | Only FBA sellers who enjoy local demand may have an advantage. |
In conclusion, trade and business are bound to be affected in the UK over the course of the next 2 years, because the EU is not only its largest trade partner, but also a considerable source of manpower, brainpower, investment and research funding. Local businesses that rely on a European workforce or EU funding will find it harder to operate in the UK. Those that don’t will still see increases in running costs.
Maria is in the Business Development team of SellerEngine Software. She enjoys the challenge that novelty brings when expanding online businesses, and untangling tangled strings when trying out new things. The greater the effort, the sweeter the reward, isn’t it?