By Alexander Otto, Head of Corporate Relations at Tradebyte

Since January 31st 2020, when the UK officially left the EU, the UK retail industry has undergone significant transformation. The controversial decision in favour of Brexit following the 2016 referendum has reshaped the rules of international trade between the UK and mainland Europe - to the detriment of UK brands and retailers seeking growth outside of the domestic market. For many British businesses, the path to expansion is now fraught with challenges. The additional red tape incurred by the country's withdrawal from the EU has made it considerably more difficult to tap into the EU's lucrative eCommerce market. These challenges include higher logistics and export costs, complications in registering for an EU entity for trading, and significant delays amidst an already competitive and intensified environment characterised by tight profit margins and the need to respond quickly to the latest trends.

More significant challenges, fewer sales

A new research report we've conducted in partnership with Retail Economics reveals the heightened challenges facing UK retailers in the wake of Brexit. It has constrained growth opportunities by introducing many challenges for UK brands and retailers selling in the EU. Increased customs paperwork, including complex declarations, VAT intricacies, and evolving product regulations, slow down exports and elevate operational costs significantly, for example. Meanwhile, a shortage of expertise in customs compliance, international trade regulations, VAT management, and the additional complexities of securing visas for low-paid retail workers creates operational bottlenecks, hindering smooth cross-border trade. The potential requirement for VAT registration across multiple EU countries, coupled with upfront financial guarantees, strains resources and poses financial risks for brands and retailers, especially SMEs. Shifts in regulatory standards between the UK and the EU introduce compliance complexities, such as varying product standards and safety regulations, necessitating careful adaptation and additional resources for compliance. Uncertainties surrounding border procedures, customs checks, and regulatory compliance have disrupted supply chains, leading to delays, shortages, and increased transportation costs for UK brands and retailers sourcing materials or products from EU suppliers. The impact of these challenges is stark. UK retail sales to the EU have plummeted by a staggering £5.9 billion since 2019. This is a significant loss, particularly when considering the potential of the thriving European eCommerce market. The online retail sector alone is estimated to contribute £323 billion of annual sales to EU economies, a potential that UK-based brands and retailers are currently unable to fully tap into due to additional trade frictions.

Varying impact on retail categories