Some time ago now, the British voted to leave the EU. Perhaps it would be better to say that 51.89% of the British who went to the polls (72%) voted for a ‘Brexit’. An outcome that sent shockwaves through Europe. Predicting the future, and the consequences of a Brexit in particular, is extremely complicated. In this article you will find a number of frequently heard opinions and some experts talk about the possible consequences for cross-border e-commerce.
A lot has happened since the referendum. Some examples: Cameron has resigned, Scotland has indicated that it will look at all possible ways to remain in the EU, stock markets have reacted negatively, the value of the pound has dropped, thousands of Brits residing in Belgium are trying to obtain Belgian nationality and many companies with headquarters in Great Britain are looking for alternatives. “Uncertainty” is the best word to describe the current situation.
Point of No Return
The president of the European Commission, Jean Claude Juncker, has taken a very clear position after the referendum. He believes that the United Kingdom’s exit should be put into effect as quickly as possible. The British and the EU have never really been happily married. In an interview with BILD / Business Insider, Juncker clearly stated his position: “The will of the British people must be carried out as quickly as possible. Article 50 of the EU treaty states that the United Kingdom must leave the EU within two years. During this period, 43 years of European marriage must be dismantled. This raises a large number of specific and complex questions: what will be the future status of the millions of EU citizens residing in the UK and of the British citizens residing on the continent? What effect will leaving have on the thousands of British pensioners living in Portugal and Spain who will lose their access to the welfare and health systems? 53 trade agreements, established by the EU on behalf of the member states, must also be re-examined.” Like Juncker, German Chancellor Merkel also emphasizes that the British will not be able to engage in ‘cherry picking’. The question is whether the United Kingdom and the European Union can live without each other. Economically speaking, the two players will always remain important to each other, even if circumstances change.
The big ‘why?
For many, the British decision to leave the EU comes as a big surprise. The British had a deal with the EU from which they benefited greatly. Free trade in the market, free movement of people within the EU – while retaining their own currency and passport control. The British-European relationship was a model for the benefits that Europe can offer. One motive for a Brexit may be found in the words of Boris Johnson, leader of the Brexit campaign, who said in February that the EU only listens to a clear “No”.
Donald Tusk added in the Wall Street Journal in May that “the EU is obsessed with total integration and therefore no longer sees that ‘ordinary citizens’ do not share the EU enthusiasm.” A closer union can only be achieved if the people also support the European agreements. Now there is a spectre haunting Europe of a break-up and Tusk indicated that the federation’s vision was not enough to ward it off.
MEP Nigel Farage (UKIP) once again addressed this sentiment on June 28 in the European Parliament. He accused the EU of stealing and telling lies to the rest of the inhabitants of Europe.
To Brexit… or not to Brexit?
The question is whether anything will actually happen. Referendums have led to turmoil within the EU before. The Danes already said no to the Maastricht Treaty in 1992, while the Irish rejected the Treaty of Nice in 2001 and the Treaty of Lisbon in 2008. After amendments, however, these treaties were approved after all, so who knows, there may not be a farewell at all and the result of the British referendum may not be definitive at all. What if Article 50 is never invoked? What if the result is just a ‘European Makeover’ instead of a member state leaving the Union?
ECommerce and Cross-Border Trade
If there is a success story of cross-border enterprise, it is that of the United Kingdom. Europe’s most mature online retail market is not only the favorite shopping destination of many international online shoppers, retailers also benefit from the large international audience. The success is not only due to the maturity of the market and technological developments, but also the fact that English is the most widely spoken second language in the world. According to a report by the Ecommerce Foundation, the UK market is the third largest in the world, after the giants China and the US. It is the second most popular cross-border market after the US, and based on online capital expenditure, the UK is even at the top. British e-commerce pure players such as Boohoo.com or ASOS see a large part of their sales coming from buyers across the border. For the time being, the weak pound seems to have mainly benefited British e-retailers: they are selling more because their prices are now favorable for Europeans and Americans. But can we predict the consequences of a (possible) Brexit for cross-border online retail in the United Kingdom and the EU in general?
Cross-Border Magazine has gathered some ideas from a panel of experts from various fields to shed light on the possible consequences. Feel free to share your thoughts too! We love to participate in a lively discussion!
Luc Delany, CEO Delany & Co, Former European Policy Manager of Facebook
As the dust settles from the British referendum, many of us are trying to understand what it means for our country and our companies. What is certain is that the new Conservative government will be formed with an unelected Prime Minister. He or she will have to set the Brexit strategy in motion, even if it is an ill-considered move to invoke Article 50 without parliamentary debate. New elections may even be called, as the new government technically has no mandate from voters (the British referendum was purely advisory).
For cross-border matters: plus ça change, plus c’est la même chose. For now, the United Kingdom will remain a member of the EU for at least two years after Article 50 has been invoked (which may never happen). A smart prime minister will want the support of parliament in the name of democracy and will want to share the blame for what happens next. Parliament does not want to leave the EU at all.
Whatever happens, the United Kingdom has one of the strongest economies in the world. The EU will want to trade with the British and vice versa. That could mean that a 3% trade tariff is included in the exchange rate or that other taxes are reduced on the British side. It is not the end of the world, just the world as we know it.
Sjoukje Goldmann, Cross-Border E-Commerce Researcher, PhD Candidate and Lecturer at the University of Applied Sciences in Amsterdam:
In our study ‘The State of Cross-Border E-Commerce in Europe’, we see that the UK is one of the leading countries on the continent when it comes to (1) the number of online retailers that offer international shipping from their webshops (50-70%) and (2) a large share of cross-border webshop visitors (>30%, the European average is 23.6%). Differences in legislation between various European countries is, unfortunately, still one of the biggest barriers to successful cross-border e-commerce in the European Union (EU). The EU is working hard to harmonize the rules between member states, but with Brexit, the United Kingdom is no longer part of this. We expect this to have a negative impact on the number of European consumers visiting British webshops.
Lily Varon, Forrester Analyst:
“Whereas the long-term consequences of Brexit will become clearer in the coming weeks, the short-term uncertainty will affect e-commerce and cross-border trade in the region. Regardless of the outcome, online retailers can expect the following: a) fragile consumer confidence, which will affect spending, b) uncertain immigration regulations, which will affect staffing levels and the hiring of new staff, and c) slower delivery and development as retailers struggle with unclear regulations on trade and privacy instead of being able to focus on customer experience. Where a political crisis is certain, the question is whether the economy will only be affected in the short term or whether the impact will be longer-term. This largely depends on the decision that parliament makes and, in the case of a Brexit, which trade agreements are concluded.
Frank van den Berg, Country Manager and Export Expert UK (Salesupply):
While there will undoubtedly be changes in the longer term for trade and other relationships, some fundamental things will remain the same:
- The UK remains by far the largest e-commerce country in Europe, comparable in size to France and Germany combined. It is also the fifth largest economy in the world, remains a member of NATO and retains its seat on the UN Security Council.
- The UK’s financial and fiscal management is extremely strong. The national debt as a percentage of GDP has been reduced from 11%, six years ago, to 3%. In other words, the British economy is one of the healthiest in the world.
- The European continent remains one of the UK’s most important trading partners and the UK remains one of the most important trading partners for the countries in Europe. The foundation of the economy and trade will not change.
- This was not a vote against working with partners in Europe and other places in the world, not a vote against other people. It is more a vote against an institution that people no longer had confidence in. It is a desire to work together in a different way.
- More structural issues such as trade agreements will take several years to unravel. Until then, the current deals will remain in force.
- Compared to examples such as Norway and Switzerland, most rules and treaties will remain the same. Free movement of people will continue to exist in one way or another.
- All parties, including the EU and the UK, have an interest in making the changes as smooth as possible, without affecting international trade.
- The UK has always been on the edge of the EU, and not just in a geographical sense. It is also a country with its own currency, so not much will change there.
- Even if the pound is low against the euro in the short term, which could possibly affect your sales prices, it also means that local competitors have to pay more to import products, which in turn drives up their prices.
- English remains the dominant language in e-commerce and a good English webshop is an excellent starting point for a webshop anywhere in the world.
- A strong English team in the UK is always ready to help you and answer any questions.
