Analysis of Brexit's Effects on Cross-Border Online Shopping in the UK

Desklib provides past papers and solved assignments for students. This essay analyzes Brexit's impact on UK international shopping.

ARGUMENT ESSAY (MOD003311)
1

Contents
Introduction......................................................................................................................................3
Arguments........................................................................................................................................4
Conclusion.......................................................................................................................................8
Bibliography....................................................................................................................................9
Reference.......................................................................................................................................12
2

Introduction
Brexit is an acronym of “British Exist”. This simply refers to the decision taken by the U.K. on
23rd June 2016 whereby they decided to leave the EU (i.e. European Union). The European
Union is nothing but a political and economic partnership that has involved around 28 European
nations. This has started just after World War II for fostering the economic coordination and co-
operation. The main motto of this integration was to avoid the situation of war with one another
and working together efficiently. But the decision of the United Kingdom of leaving the EU has
surprised everyone. This may bring so many changes in the economic and financial condition of
the UK. The companies which are present in the UK are facing various issues related to the
business since they are now not the part of that 28 European countries. The present report is
going to highlight “the implications of Brexit upon the international shopping”. This will be
explained with the help of several cases along with their examples.
3

Arguments
This has been found from an investigation that international or online cross border shopping is
very famous in Britain. As per the recent PayPal survey, around 36 % of the shoppers have
purchased goods and services through online shopping in other nations in 2015. Etsy, Amazon,
Alibaba, and eBay are some of the popular online websites that offer products or services over
the internet on an international basis. Brexit is impacting the UK in several ways in context to
international shopping.
ARGUMENT 1-
Firstly, the exchange rates have been affected greatly. According to Goldman Sachs, the level of
GBP could decrement by 20%, if the EU will be left; there will be no improvement since 1985.
This statement states that the weakening of the currency known as the pound has occurred and
this will antagonistically impact on the shopping which is brought from overseas. The price of
such goods and services would be increased drastically. Thus, any of the people who would
purchase merchandises via online shopping or from official websites of certain corporations may
see a sharp rise in the costing of their shopping. Though, it would mean that the good and
services that are being sold in the United Kingdom maybe getting cheaper to the international
shoppers. Besides this, some of the shops in the UK like Boohoo and ASOS would be benefited
by selling the products or services to those customers who are surviving in other countries. These
shops are having larger overseas operations and number of trustable users in the nation like
Australia. On the other hand, the pound has been declining constantly since the outcome of
referendum get out on 23rd June 2016. For example, in starting there was a sharp fall down
leaving GBP to EUR – 15 % in comparison to the pre-referendum levels (Freedman, 2017). The
exchange rate of GBP to AUD and GB to USD also get down by 17 % instantly just after the
vote. This shows that civilians wishing to exchange pounds into different other currencies are
getting considerably less, whereas audiences wanting to purchase pound are examining that the
current levels have become specifically lucrative. In addition to this, the value of pound was
getting furthermore decreased by a series of sudden political expansions and releasing of poor
information. For example, the VAT is being charged at standard rates that are commonly 20 %
on the purchasing of goods from outside EU, if they are worth more than £15 or over £34. The
4

traffic on the trade can be negotiated on the basis of the country; therefore the net effect cannot
be predicted. It will go up and down respectively. On the contrary, due to Brexit, the UK has
faced loss regarding the variety of goods and services that have been coming from other nations
which are lying within the EU. Before Brexit, a large number of the company used to do
business in the UK by supplying a wide range of products and merchandises. While now, the
situation has changed quite less number of firms are interested in doing business there. Due to
this, the country is not having a wider variety of products and services (Hunt and Wheeler,
2017). In this context, the government of the United Kingdom is promoting to the FDI that is
Foreign Direct Investment.
5

ARGUMENT 2-
The second factor which is being impacted is import duty and VAT. When the UK was working
within the European Union, the companies from various firms falling under like the automotive
industry, airline sector, financial services sector, the pharmaceutical industry, etc. was not paying
extra taxes and importing charges in case of working in such nations (Worldfinance.com, 2019).
But after the occurrence of Brexit, all of the companies of the UK which are willing to or still
working in any of the nation existing within the EU have to face high taxation as well as
importing charges. For example, Toyota is going through such a situation since it has to pay
extra money in the form of taxes and other importing along with shipping charges. On the
contrary, one of the good news is a declaration that enterprises which are importing goods from
or outside the EU would not have to pay VAT as quick as the merchandises reach within the
United Kingdom. But they will be able to accounting the VAT later in their VAT return
(Lexology.com, 2019). This has been seen that there is no requirement of paying VAT when
products or other services are from the EU arrives in the UK. The proposal associated with the
Taxation (overseas trade) bill states that the retailers, as well as manufacturers of United
Kingdom, may have to pay VAT upfront on post- Brexit imports of raw materials from those
companies which are present within the EU, in a similar manner as VAT is applied to other
nations which are outside the EU.
6

ARGUMENT 3-
The third area is related to customer retention and protection. When firms present in the UK
would sell their manufactured products and services to those people who are living beyond their
borders through online commerce, and then there will be occurring great issue associated with
the retention of customers. This is obvious that civilians surviving beyond international borders
show more trust in those firms which are already present in their home town or place (Beeny,
2019). Therefore, even companies are offering online shopping to such people; they would prefer
their trustable and old corporations. For example, if Marks and Spencer would provide online
shopping services to the customers of other countries, then they will face many business
problems. People living in the other nation would not prefer their goods and services and due to
that, they would face huge loss in the future. Apart from this, M&S will also lose their control on
their home customers or domestic one. On another side, the shopping of customer also gets
impacted greatly. When people purchase goods and services from out of the country, they have
to consider or they are covered by the norms and legislation of that nation where the seller is
located. So, if customers would buy something from those countries which are present under the
EU, then they will be covered by the policies and customer protection of EU (Market-
inspector.co.uk, 2019). This is profitable for them as they have not to pay additional taxes or
charges. If UK will be outside the EU, there would be no guarantee that shops integrated with the
EU will be abided by them for shoppers present in the UK. Therefore, it would be a more
complex task of getting redress should a deal from EU nation go wrong. At the same time, it may
be difficult to determine exactly what is going on for international shopping should Brexit
happens, it is probably that in less time period at least cross border shopping would be more
costly and arduous for the common people.
7

Conclusion
By examining the above based report, it can be said that Brexit is creating great implications on
international shopping. This impact is somehow positive or somehow negative. The companies
performing within the United Kingdom can now start their business in any of the nation or place
of their choice. They are also not liable to follow any kind of norms related to the business of the
EU. Thus, firms have received full freedom and which is good or beneficial for them. On the
other hand, the high rate of taxation and VAT has to be paid by those enterprises which are
outside the EU if there are willing to do business within nations falling under European Union.
On another side, the customer base of the ventures would also get decreased after the Brexit if
they are going to provide choices of online shopping to the customers. The main reason for this
is nothing but the feeling of insecurity existing in the mind and heart of international consumers.
These concepts have been described properly in the above report in an effective manner so that
readers will get to know about the same.
8

Bibliography
Article 1: (How will international shopping be affected by Brexit?)
A full reference for the article: Beeny, N., 2019. How will international shopping be affected
by Brexit?. [online] MyInternationalShopping.com. Available at:
<http://www.myinternationalshopping.com/news/international-shopping-and-brexit>. [Accessed
on 23 March 2019].
Link: <http://www.myinternationalshopping.com/news/international-shopping-and-brexit>
Finding and discussion:
By going through this article, it has been found that Brexit is affecting greatly on the business of
international shopping. Before Brexit, all the firms present in the United Kingdom are taking
different advantages related to commerce. For example, all the currencies are the same for all
nations which are falling under the European Union. They were also not paying high taxation
rates as they were one of the important members of the EU. But after the decision of Brexit, the
entire scenario has changed which is negatively impacting on the performances as well as on the
working of the ventures. On the other side, firms now have to pay a higher rate of taxes and VAT
if they try to sell their products or services beyond their borders. In addition to this, customers
are also facing certain issues related to the costing. The level of price is now touching the height
of the sky over the internet i.e. international online shopping is proved to be more expensive in
relation to the normal or direct purchasing. Thus, it can be said that both the common citizens
and the companies are going through difficult situations.
Article 2: (Brexit: All you need to know about the UK leaving the EU)
A full reference of the article: Hunt, A. and Wheeler, B., 2017. Brexit: All you need to know
about the UK leaving the EU. BBC News, 25.
Link: < https://scienzepolitiche.uniroma3.it/aelia/wp-content/uploads/sites/29/2009/11/Brexit.pdf
>
Finding and discussions: This article was found very important as it gives information related
to the Brexit. This helps in understanding the concept of Brexit in a proper and easy manner.
9

According to this article, Brexit is nothing but a word that is utilized for stating the UK leaving
the EU. This happens because of the referendum where people are allowed to state their views
regarding working within the EU or leaving the same by giving their important vote. This voting
was held on 23rd June 2016 where after receiving the result, it has been seen that the UK has
decided to leave the EU. This matter of leave was won by 51.9 % to 48.1 %. Here, the other
nations like Northern Ireland and Scotland have backed and decided to stay in the EU. After this
referendum, Theresa May had become the new prime minister of Britain.
Article 3: (Tax and Brexit)
A full reference for the article: Freedman, J., 2017. Tax and Brexit. Oxford Review of
Economic Policy, 33(suppl_1), pp.S79-S90.
Link: < https://academic.oup.com/oxrep/article/33/suppl_1/S79/3066085>
Finding and Discussion: This article is about the relation between taxes and the Brexit. It is
proved to be very helpful in understanding the similar concept. After Brexit, the taxation rate of
the other countries becomes very high which make difficult for the firms those who are working
in the UK. They have to pay a high rate of traffic on the goods and services if they import the
same from other nations of EU. Thereby, it can be said that all the corporations which are doing
business in UK would face huge losses. In – fact, a large proportion of the money or profit
earned would get invested in paying such taxes only. In addition to this, the government of
different other nations are having their own rules and legislations associated with the commerce.
The UK’s companies have to follow or abide all such norms and policies. If they would not do
the same, then they will not be permitted to start their business on that place. On the contrary,
Brexit also developed opportunities for the UK as they can become tax heaven which can impose
low rates of taxes and new incentives related to tax. The reason for this lower taxes or traffic is to
promote foreign direct investment within the nation so that more and more countries can get
attracted towards them in an effective and efficient manner.
10

Reference
 Beeny, N., 2019. How will international shopping be affected by Brexit?. [online]
MyInternationalShopping.com. Available at:
http://www.myinternationalshopping.com/news/international-shopping-and-brexit
[Accessed 23 Mar. 2019].
 Freedman, J., 2017. Tax and Brexit. Oxford Review of Economic Policy, 33(suppl_1),
pp.S79-S90.
 Hunt, A. and Wheeler, B., 2017. Brexit: All you need to know about the UK leaving the
EU. BBC News, 25.
 Lexology.com., 2019. Preparing for Brexit - Customs Duty and Import VAT Explained |
Lexology. [online] Available at: https://www.lexology.com/library/detail.aspx?
g=7c88b74a-e139-4ac1-8f42-5ee5beae0d2d [Accessed 23 Mar. 2019].
 Market-inspector.co.uk., 2019. Impact of Brexit on Businesses in the UK | Market-
Inspector . [online] Available at:
https://www.market-inspector.co.uk/blog/2016/10/impact-of-brexit-on-businesses-in-the-
uk [Accessed 23 Mar. 2019].
 Worldfinance.com., 2019. The industries hit hardest by Brexit. [online] Available at:
https://www.worldfinance.com/home/the-industries-hit-hardest-by-brexit [Accessed 23
Mar. 2019].
11