Brexit day is here! Well kind of. So what's next for CBT

After the June 23rd, 2016 UK vote on whether to remain a member of the EU went for leaving an air of uncertainty has surrounded the CBT market in this region. The UK is the largest cross border trade market in Europe and it has been growing significantly year on year. There are figures in fact that show of all European CBT, by 2020 the UK would make up 60% of that.

The question is of course, does this still remain the case after Brexit?

As usual, the answer is less certain than the question. There is no doubt there was an immediate impact after the initial vote. For the UK retail expert market though this has been particularly positive. The damage to GBP from the uncertainty at this stage in the process has led to items that were once competitive with European prices becoming, in essence, cheap, leading to a rise in UK CBT sales.

There's two things about this situation to take into account:

1) It didn't lead to an overall increase in Cross Border Trade. Buyers in the UK are feeling the pressure of the weak pound so are buying less. Alongside this, for UK buyers items from abroad have become equally more expensive so they are buying less internationally, leading to no real change in the overall CBT market.

2) This is unlikely to be a long term position. As the process goes on and more clarity is available the pound is likely to claw back some, or even most, of its losses.

These last months since October have seen a marked drop in UK CBT into Europe and it will be interesting to see what comes next.

So what about the effect after the UK leaves the EU?

This of course all depends on what agreements are reached eventually reached at the end of this year. My own point of view is that it is unlikely the UK will come away with any long term bad agreements. Given the size of the UK economy and how important it is to Europe as a trading partner, regardless of the threats and demands that have been banded around lately, it only makes sense that the agreements are beneficial to both sides in the end.

Where there are risks is in regard to how much friction will be introduced. Complex VAT and customs arrangements can lead to less retailers being able to, or interested in, cross border; at least in the SMB market. So we could see a reduction in the number of retailers actively pursuing selling into Europe.

We could also see customs charges being introduced for UK goods into the EU, but again I see this as unlikely as in such an event nobody will really win. Much of this process has been pretty unpredictable though...

Demand may also fall if imports into the UK from Europe start having to go through complex customs clearance processes leading to delays in shipping which buyers can't tolerate. This would take us back 50 years but with the difference that we are in an age where expectations of quick and easy delivery are at a height never seen before.

So there are a number of risks. Given how competitive the UK domestic market is, driving down prices and driving up innovation, it seems unlikely the demand for UK merchandise will be damaged in the long term.