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Future of Retail Q1 2022

Seismic changes for retail as rules of trade shift

iStock / Getty Images Plus / Mr. Ilkin

William Bain

Head of Trade Policy, British Chambers of Commerce

The world of retail is undergoing a huge transformation driven by consumer trends, logistics and global forces. 

In the past two years, retailers in the UK have had to adapt to significant headwinds from rising shipping costs, the introduction of the EU-UK trade deal and new friction in supply and sourcing chains.

Major EU trade challenges for retailers following Brexit

The UK’s trade deal with Europe following Brexit has led to two big changes. Firstly, rules of origin now apply to UK-EU trade; goods imported from the rest of the world into the UK cannot be moved on to the EU without paying customs duties. This has led to a huge fall in the export of clothing and textiles to the EU. Secondly, import VAT must be paid on many goods valued above £150 when they arrive in the EU. 

Smaller exporting retailers have been using the EU import-One Stop Shop (iOSS). But this requires, in many cases, a fiscal intermediary in the EU – a huge additional cost. Larger retailers adjusted their distribution networks. Some have set up new warehouses in the EU to supply their European online customers. Others have made full use of customs warehousing and returned goods relief to reduce their exposure to customs duties on the re-export of goods.

71% of exporters said the trade deal was not contributing to business growth.

Smaller businesses are suffering more

These are not options so readily available to smaller retailers and many have given up on exporting to the EU. In a recent BCC survey of over 1,000 companies, 71% of exporters said the trade deal was not contributing to business growth whatsoever.

Free trade agreements 

The biggest challenge ahead will be to make cross-border retail trade quicker, more secure and safer for consumers to pay for goods. This depends on digital trade chapters in free trade agreements and the liberalisation of e-commerce at the World Trade Organization (WTO).

The UK Department for International Trade (DIT) has recently concluded an ambitious Digital Economy Agreement with Singapore, digital trade provisions in its trade agreement with New Zealand and aims to emphasise this area in its negotiations with India, Canada and the Gulf Co-operation Council.

Retail is a responsive and fast-moving industry. Added to by the right policy choices between the UK and its trading partners plus greater efficiency of customs processes, it has every opportunity to lead the growth in global e-commerce in the next decade. 

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