Ecommerce firms face post-transition headache after year of pandemic boom

Wed 13 Jan 2021
Posted by: William Barns-Graham
Trade News


The impact of new customs and trade rules contained in the UK-EU trade deal is growing for ecommerce traders, particularly those concerning the origin of goods.

The UK secured a zero-tariff free trade agreement with the EU at the end of last year, but nonetheless left the EU single market and customs union on New Year’s Eve.

Sales stopped

Analysis from Trade Insights shows a number of problems have begun to emerge in the ecommerce space, with many retailers not ready for the changes.

This has led many firms to temporarily suspend cross-border sales, including Asos, John Lewis, Debenhams and Fortnum & Mason.

EU retailers such as Scandinavian Outdoor, Bike Bits and Best Secret have also stopped selling to the UK.

Rules of Origin

Rules of Origin in particular have created confusion.

Under the trade deal goods can only move between the UK and EU tariff-free if they are deemed to have sufficient UK or EU originating content, meaning that a certain percentage of the components have been made in the UK or EU.

According to the British Retail Consortium, at least 50 of its members have been impacted by the new rules. River Island and H&M have said they expect to pay tariffs on some clothing as a result.

VAT confusion

New requirements for VAT to be paid at the point of sale, rather than the point of import, have also led to confusion. Furthermore, the UK has removed a previous Low Value Consignment Relief, which relieved import VAT on consignments of goods valued at £15 or less.

Increased administrative burden led DPD to pause its road freight service into Europe last week. It said 20% of parcels had incorrect or incomplete data attached and had to be returned to depots that are not equipped for returns at this level.

Logistics boom

The upheaval comes amid an increasing use of logistics storage space by ecommerce sellers, according to City AM. This surge has arisen due to the rise of online buying during the pandemic.

According to analysis by real estate advisor CBRE, the total take up of logistics space jumped 69 per cent year-on-year to 42.87m sq ft.

Paul Farrow, head of UK logistics at CBRE, said: “Looking forward, we expect appetite for the logistics sector to continue to grow, with over 8.6m sq ft currently under offer and available space at its lowest since 2017.”

Consumers will pay

Freight costs are also rising due to the end of transition and The Times reports these costs will be passed on to the consumer.

Transporeon, which tracks freight costs, said the average cost of transporting a lorryload of goods from Germany in the first week of 2021 was up 26% and lorries from France cost 39% more.

Sarah Laouadi, of Logistics UK, a trade group, said higher freight costs “will eventually have an impact on prices” for consumers.