When it’s time to expand your company’s international e-commerce footprint, where you get your start is important. With no language barrier keeping you from reaching its shoppers and years of close trade links with the U.S., conditions in the UK make it a natural starter market for international e-commerce expansion. That is to say, conditions did look good. Then, in 2016, the UK voted to leave the European Union. The result, known as Brexit, has added a large dash of uncertainty to its economic future.
On the surface, an English-speaking nation of 65 million people with a highly developed online infrastructure, a modernized economy and a $2.6 trillion GDP is the perfect market for your e-commerce goods and a great launch pad into other European markets. The question is: Has the unpredictability of Brexit changed this outlook for businesses like yours?
Your E-Commerce Decision: The Increasingly Complex Case for the UK
The negotiations surrounding the Brexit process are still ongoing, and it remains unclear what form the UK’s future relationship with the EU will take. The confusion stemming from these events has a direct impact on UK business and trade with non-EU countries including the U.S., due to the fact that British legislators will have to replace their present EU rules with an as-yet undetermined new group of regulations.
Company leaders are asking tough questions about the future form of the relationship between the UK and EU, and there are no good answers at present. For instance, half of exported British cars go to Europe, and manufacturers in the EU rely on UK parts for their supply chains. Tough trade barriers could also harm farmers, who are wondering about the potential loss of EU farm subsidies. Uncertainty in the UK’s pharma sector rests on the loss of efficiency from border checks and the need for skilled research and development labor from the EU.
Does this list of unresolved questions mean your company should stay away from e-commerce expansion into the UK? Not at all. In all likelihood, you’ll still find a strong, receptive market for your products and can forge ahead with cross-border sales. You must, however, leave maneuvering room in your strategies and partner with companies that understand international trade. You never know when or how the new regulations may take shape.
Business as Usual?: E-Commerce in the Transatlantic Relationship
Before shredding all expectations about targeting the UK as an e-commerce market, it’s worth considering the fundamental facts behind transatlantic trade. While the endgame of Brexit is still shrouded in mystery and dependent upon ongoing negotiations between British political parties, it’s clear that the U.S. will remain a major player in the British commerce landscape once the country leaves the EU.
Retailers are currently wondering about the fate of the EU’s free trade agreements with countries such as Turkey, Canada and Morocco. Will the UK be able to replicate those conditions once it has departed? With the UK-EU relationship potentially becoming more complicated and difficult, it’s easy to imagine the British authorities doubling down on easy relations with U.S. buyers and sellers.
The Department of Commerce (DOC) has the numbers on the existing U.S. relationship with the UK, and the bonds clearly run deep. The UK is the fifth-biggest export market for American products and the No. 1 market for U.S. services. American exports to Britain in 2017 totaled approximately $122 billion. While the overall economy in the UK is growing more slowly in the past, weighed by caution around Brexit, the fundamentals remain solid.
With the UK and EU negotiations’ current “divorce deal” deadline placed at Oct. 31, 2019, there is room for conditions to change many more times before the end of the Brexit process. In fact, there have already been several delays, with the initially planned date of March 29 having come and gone.
Delaying your introduction to the UK e-commerce space until the end of Brexit negotiations could mean putting it off time and again. If market analysis around the UK is promising now, you may as well take action and move in. The DOC still describes Britain as “A critical market for American exports of goods and services and a key destination of U.S. foreign direct investment.”
Brexit Uncertainty: What Will Consumers Do?
Making predictions around the post-Brexit impact on your e-commerce business means projecting two outcomes at once. Sales in the next few years will be affected by both the updated regulations around transatlantic trade and consumer behavior in response to the new state of affairs.
Forbes contributor Nina Angelovska pointed out that the immediate aftermath of the Brexit vote involved UK shoppers favoring domestic companies more than they had in the past, at least somewhat motivated by fluctuating exchange rates and the decline in the value of the pound. In the future, currency changes may be far less influential than changing delivery times, however.
The European E-Commerce and Omni-Channel Trade Association’s Maurits Bruggnik told Angelovska that changing delivery times and more complicated customs procedures could introduce friction between the UK and EU. Far from being bad news for U.S. companies, this could represent an opening: With continental European merchants now less capable of selling easily to UK shoppers than before, sellers like you can step up their efforts to win buyers over.
When it comes to small and medium businesses selling from the U.S. to UK customers, there are government agencies working to determine the shape of the future relationship, but they haven’t yet come to any conclusions. The U.S.-UK Trade and Investment Working Group will bring agencies together this summer to ensure consistency in commerce between SMBs in the two nations.
Insurance Against Risk: The Importance of Strong Business Relationships
While dealing with the UK e-commerce market can seem intimidating as the country leaves the EU, age-old practices for approaching new cross-border environments can still help your company succeed. For instance, you can partner with DHL, which maintains a developed logistical support network around the world.
DHL is creating cross-functional teams to address the evolving situation, the legal structure, regulations and more. Having such a capable third party on your side to navigate issues such as taxes and duties can insulate your small business against changes as they occur.
The UK customs system, ranked No. 5 in the world for efficiency by the World Bank, is working hard to keep its effectiveness intact no matter the final form the Brexit bill takes. With new partnerships and streamlined, heavily electronic systems, authorities are set to cut down on entry and exit requirements, improve pre-arrival notifications capabilities and share data seamlessly with the EU.
The past few years have been chaotic across the Atlantic, but the facts remain essentially unchanged: The UK is the third-largest e-commerce market in the world, and the potential audience for your offerings is vast and promising. Brexit uncertainty is real, but you shouldn’t let that stop you.
To learn more, check out the DHL UK Country Guide and stay tuned to our blog for updates. We’re keeping a close watch as the situation solidifies.