The day of January 30, 2020 was a day that will go down in history.
The United Kingdom and the European Union formally went their separate ways. The full impact of this split is yet to be assessed. It definitely will impact business. If you have an e-commerce business, you may be especially affected.
As with all divorces, the UK’s split from the EU is not a clean-cut ordeal. There are still ongoing negotiations and discussions, especially as the UK is trying to establish its own trade agreements with countries around the globe.
There is a limited time frame when a transitional period will allow both the UK and the EU to operate under some of the same laws they did while they were merged. However, when this transition time has ended, the actual effects of the change will be felt. Many industries may be significantly affected, but the impact that Brexit could have on cloud computing services such as cloud storage, business continuity and data sovereignty is still uncertain.
It is imperative that e-commerce businesses that are connected to the UK market understand how these developments play out. They need to sit with their web designers or look at their web builder to make adjustments to their website that reflect the new reality on the ground. There are only a few months in the transition. As of January 1, 2021, e-commerce businesses must be ready for what lies ahead.
Brexit, E-Commerce, Trade, and Travel
Until December 31, 2020, cross-border trade between the UK and the EU will continue as normal. After December 31, 2020, it’s anyone’s guess what trade will look like.
It is hoped that the UK and the EU can come to a mutually beneficial trade agreement. Trade between the EU and the UK is valued into the hundreds of billions of euros.
Travel regulations will stay the same until the end of 2020. This means that people can travel between the UK and the EU in the same hassle-free manner that they do now. It also means that until the end of the year e-commerce business owners can live either in the UK or the EU and may work and live where they want.
However, as of the start of 2021, this will change. E-commerce owners will need to consider changing their residence to a place where they can legally work and registering their business in a place where it can be a legal entity.
Brexit’s Impact on E-Commerce As a Whole
A no deal Brexit will be detrimental to the e-commerce sector. In fact, e-commerce will probably suffer more than other sectors.
Many e-commerce businesses are small and medium-sized enterprises. They can operate because they don’t have the overhead of tariff barriers. If proper trade negotiations are not carried out, trade tariffs could be imposed.
Large e-commerce stores will also be impacted. The extra cost of trade tariffs will be paid for by the buying public. E-commerce delays caused by shipping challenges between the EU and the UK should be expected. If there is no solid deal with the UK and the EU 27, there may not be the legal framework available for trade to happen. Or if trade happens without a solid legal framework, there could be several complications.
Another thing that might cause a problem is the fact that all of the e-commerce stores have their own hosting providers that might change the prices of their hosting packages after the UK is no longer a part of the trade agreement. Alex Williams from Hosting Data UK explains further:
“There is a fair amount of EU based web hosting providers that operate in the UK. That means that when the trade agreements come to an end on October 31st, the prices of their hosting services might increase since the hosting providers that are located in European countries could be subject to tariffs when it comes to supplying the UK.”
Catalyst2 also covered this issue in detail stating, “It is really unknown at this point exactly what will happen with services when, or if, the UK exits the EU and its regulations. There could be massive changes to the laws within the UK that determine how web hosts operate”.
Get Your E-Commerce Business Prepared for Brexit
The better prepared you are now, the better your e-commerce business may fare once the full force of Brexit is felt. As a small online trader, your ability to influence how trade negotiations between the EU and the UK play out is little to none. But you have control over your e-commerce business.
Foreseeable challenges will be customs, sales tax, and other related bureaucracy. You can avoid these problems by using your time now to set up logistic centers in both the UK and the EU.
If you are a small or medium-sized organization, it might seem too expensive to set up logistic centers in the UK and the EU. However, there are several e-commerce entrepreneurs who are already taking this step. Many have shipped much of their business to Germany.
Planning means thinking about the logistical needs of your organization and then coming up with an appropriate strategy to cope.
For example, when thinking about the supplies you need ask yourself, what are the raw materials I’m going to need? Where will these be sourced from? From there you can work through issues of importing or exporting. You can adjust your timeframe to align to the new shipping and delivery reality.
On the demand side of things, you can evaluate where most of your online orders come from. Do they come from the other side of the canal? If so, you may want to invest in establishing logistic centers.
The Future of E-Commerce after Brexit
Leaders from both the UK and the EU speak optimistically about the chances of there being a deal before the close of Brexit. Unquestionably, there are ongoing negotiations and power struggles as each government strives to look out for its own best interests and that of its citizens.
COVID-19 has thrown a monkey wrench into a lot of things. In 2019, when the global pandemic was not even thought of, it seemed like Brexit’s plans were running smoothly. Theresa May transitioned power to Boris Johnson, and the UK sailed smoothly into its transition period. Then, COVID-19 hit. For the better part of 2020, many governments around the world, including the United Kingdom and the EU, have had citizens and politicians quarantined in their homes. There are a lot of questions about how the pandemic has affected Brexit negotiation development.
Conclusion
Prime Minister Boris Johnson is determined to close Brexit at the end of the year whether there is a deal or not. As a precautionary measure, e-commerce organizations should begin creating logistic centers in mainland Europe and the UK.
If because of the expense this option is not realistic, e-commerce companies can join a fulfillment network. At the end of the day, what is most important is that e-commerce companies are adaptable.
The circumstances regarding trade and customs between the UK and the EU may change a couple of times before things settle. However, the e-commerce company that is prepared is the one that will survive the storm regardless of the form it appears in.