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What impact would a UK exit from the EU have on eCommerce?

On Thursday 23 June 2016, the British people will head to the polls to answer the question: "Should the United Kingdom remain a member of the European Union (EU)?"

This is a big decision for the whole country, while UK retailers have to consider the implications a Brexit might have on trade within Europe – currently 28 different countries with 500 million potential customers.

FeelUnique's COO, Jim Buckle, says a UK exit would create uncertainty for UK businesses importing into the EU.

"We relocated our warehouse from Jersey to the UK during 2015, partly in order to distribute to customers from within the EU," he said. "In Jersey, we were outside the EU and as a result customers often experienced import issues and extra charges.”

Farfetch’s COO, Andrew Robb, agrees, believing his business will be negatively affected by a UK exit. "But the tough part is that there is so much uncertainty on what will happen which makes it hard to predict how much. Cross border trade will surely be impacted in some way though and I can’t see it being positive," he tells Essential Retail.

Meanwhile, Gracia Amico, CEO of Pets Pyjamas, is also concerned about the uncertainty associated with leaving the EU, she says: “The most direct and immediate impact on our business is the fact there is insecurity towards Europe, this coupled with the effect it has on the pound, means that people are opting more to stay in the UK this year."

For her business – which sells pets accessories and pet-friendly holidays online – this could potentially have a positive impact. "The predicted staycation growth is as much as 50% this year, which is great news for us as the majority of our business is in the UK."

T-shirt printing and personalisation retailer, Spreadshirt, believes leaving the EU would mean the UK would be at a competitive disadvantage against the fast-growing brands in the US or Europe.

CEO, Philip Rooke, tells Essential Retail: “As a British man, running an international eCommerce company, I sit here in Berlin thinking a Brexit would be crazy!"

He says: “The EU is a huge market on the UK’s doorstep and although the British appreciate the trading opportunities, the size of the market doesn’t get enough recognition. The EU is now Britain's largest trading partner, with over 51% of British exports of goods currently destined for its European partners. For e-retailers that is only a bit of translation and click away.”

The Digital Single Market

As part of the UK government's policy line to stay in the EU, it is championing the Digital Single Market. A European Commission initiative, the Digital Single Market is a set of standards for trading goods online across member states.

The Digital Single Market is estimated to add £375 billion per year to the EU economy and addresses many concepts of online trading including standardising VAT, data roaming, geoblocking and digital borders, copyright and intellectual property. Many strands of legislation are currently making their cumbersome journey through the European Parliament process and claim to make it easier for businesses to digital trade across European borders.

Business Secretary, Sajid Javid, said: "We have been calling for people to be able to use their online media services like Netflix and Amazon Prime anywhere they travel to in the EU. These proposals should create a simple way to do just that, without placing burdensome costs on businesses. The UK has been at the forefront of sketching out what a digital single market should look like, and we have driven forward these common sense measures that will deliver benefits for an increasingly mobile, tech-savvy public."

But Neil Saunders, managing director of retail research group, Conlumino, says the Digital Single Market is great for consumers, but is a mixed bag for retailers, as it may interfere with company operations.

"While retailers would benefit from the VAT reporting harmonisation, some things are not helpful, like removing geoblocking – a lot of retailers do geoblock because the cost of doing business is different and it's the same sort of thing with parcel delivery and shipping, there's a good reason why shipping can be very expensive," says Saunders.

Vicky Ford, Conservative MEP chairing the Internal Market and Consumer Protection Committee,  says the UK – as the largest eCommerce player in Europe, and the world – should remain in the EU so it can benefit from the Digital Single Market

"Our consumers are increasingly buying internationally so we need to make sure our businesses can sell internationally and our consumers have the confidence to buy internationally," she explains.

But the Vote Leave campaign argues the digital economy is not constrained by national boundaries.

"The UK attracts business from the west coast of America to the eastern shores of Asia," a Vote Leave spokesperson tells Essential Retail. "Businesses will continue to trade with the UK regardless of our membership of the EU. There is a free trade zone running from Iceland to Turkey, and we will be part of that after we Vote Leave.

"We send £350 million to the EU every week. This money would be better spent investing in the industries of tomorrow which create jobs and drive economic growth."


But Ford insists it is integral for the UK to be involved in the negotiations about digital trading.

“If you are not involved in the negotiations you have no voice,” she said. “If you are not in the negotiating rooms, able to suggest amendment and direction of travel, you are going to be trying to sell products to those 500 million consumers but you will not have any say on how the rules are set.”

She uses the example of mobile data roaming charges, which were finally abolished in October, with charges to be completely removed by June 2017. Ford points to Switzerland who will not be able to “roam like at home” as the legislation only covers the 28 member states.

“I've sat at the table and seen them discuss all day about these issues, and I've seen Norway and Switzerland get a seat at the table, but they have no voice and no vote, so they have to accept all these rules,” she said.

“The Out Campaign would say 'don't worry, we'll negotiate another deal'; what they don't point out is that any new deal needs to be agreed by all 27 other countries around the table.”

Spreadshirt’s CEO, Rooke also points out that the eCommerce world moves much quicker than politics. “Yes, the UK might be able to renegotiate a trade agreement, but politics and diplomacy do not move at the same pace as eCommerce. It could take years to get an agreement and why should Europe care? You’re either in the party or out; if you don’t want to be in the party, why should we save you some cake?”

But Saunders believes the UK leaving the EU would not make a huge amount of difference to retailers, pointing to companies like Zara and Primark which have launched in the US and American retailers, like Forever 21 and Walmart, which trade in the UK. 

"The biggest thing would be the transition," he says. "If we came out of the EU, there would be a large period of uncertainty, and a lot of planning and rethinking from a retailer's point of view, but it would be more difficult in the short term – without the EU, it's still perfectly possible to trade and do well."

Digital skills

The UK is already suffering from a shortage of digital talent, and Catherine Stihler, Labour MEP for Scotland, believes leaving the EU could potentially make it more difficult for retailers to hire digital employees.

"The new statistics show that more than one in five directors at new UK tech companies are foreign nationals, with most coming from other EU states. Precisely because of this lack of tech talent in the UK, companies frequently have to scour Europe to get the specific expertise they need to fill key roles."

Stihler said leaving the EU would greatly complicate this process, saying the UK’s tech start-up scene may also be put at risk. "It could threaten the ability of British tech companies to scale and trade across a single market of over 500 million consumers, and hire, mostly without restrictions, from a talented pool of EU workers."

Trade with Europe, participation with the Digital Single Market and access to talent are all up for debate and while it is uncertain whether a leave vote will result in a challenging climate for British retailers, it is clear instability will be the main concern for the industry as the public go to the polls in June. 

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