The subject of Brexit has never been too far from the headlines since the UK referendum back in 2016. While the politicians continue to drag the process out for as long as possible, under pressure from their EU counterparts, online businesses are desperate for direction.
- How will Brexit impact e-commerce websites?
- How will web hosting agreements change?
- What impact will this have on the shipping of goods?
- Will UK citizens/companies still be able to operate EU domain names?
So many questions, so little in the way of direction or answers from the politicians. Is there any surprise? We will look at what we know so far regarding Brexit and its impact on the UK e-commerce sector.
General Data Protection Regulation (GDPR)
Those who follow the world of e-commerce will be well aware that GDPR was introduced back in May 2018 as a means of securing the private and confidential data of European citizens. The idea should place a legal emphasis on businesses within and outside of the European Union, dealing with EU citizens.
The UK authorities, as part of the EU, are fully on board with GDPR. However the U.K.’s forthcoming exit from the European Union cast much doubt and confusion.
While there are many issues to address with regards to Brexit and e-commerce businesses, GDPR is fairly simple. The UK authorities and UK businesses have literally invested millions of pounds into becoming GDPR compliant. There is no way, whether inside or outside of the EU, that the UK government will scrap GDPR.
In the event of a no deal Brexit UK businesses will immediately need to be GDPR as they will be viewed as a third party outside of the EU when dealing with EU customers.
In the event of a managed exit from the European Union, including agreement on a withdrawal deal and trade negotiations, there will be a transitional period. This is likely to last between 18 months and two years and nothing will really change. What happens afterwards will be open to negotiation but GDPR is unlikely to disappear.
Brexit business tips for importing and exporting goods
Two main factors impact UK businesses based in the UK but transacting with UK, EU and worldwide customers. Here are two scenarios to consider:-
No deal Brexit
In the event of a no deal Brexit there is the potential for serious confusion, delays and added expense.
The importing and exporting of goods to and from the UK, as well as to and from the European Union, would be subjected to checks which don’t exist today.
At this moment in time there are very few if any procedures in place to cover a no deal Brexit. We know what needs to be done. Introduction of checks, but unfortunately until the UK government and the European Union are able to agree on something, everything is literally up in the air.
When it comes to the importing and exporting of goods between the UK and the European Union, a managed process would be best for all parties. This will have a major impact on online businesses not only selling their goods to customers within the EU but also sourcing parts and goods from the EU to sell on.
At this moment in time the European Union is effectively one market with freedom of trade. If you have an online business it is near impossible to make any definitive plans at this moment in time. The best scenario would be a managed exit with an agreement to instigate trade talks within a transitional period.
Unless the two parties are able to agree on a very close relationship, as close as possible to the current arrangement, it is inevitable that there will be delays in the importing and exporting of goods. This will have a knock-on effect to suppliers, delivery times to customers and ultimately customer satisfaction.
Many UK online businesses have already started investigating the use of EU warehousing and the creation of European hubs to satisfy their European customers in a more efficient manner – post Brexit. This will obviously require many UK businesses to register EU operations and go through the appropriate regulatory procedures.
The use of EU warehousing is an interesting one, both for businesses in the UK and divisions opened up within the new shape European Union.
The idea is simple. Let’s say an EU citizen sends an order. Through this process, it can be delivered from stock held within EU warehousing facilities (through third-party delivery companies). This will reduce the need to import/export goods on an order by order basis. Not to mention the fact that it will reduce delivery times as well as cost.
Many e-commerce businesses may well look to cooperate with counterparts across the EU but time will tell what the future make-up of the UK/EU trading relationship will be.
EU domain names
The issue of the EU domain names held by UK citizens/companies is a very interesting one and in many ways controversial. Quite rightly, the EU already confirmed that it will instigate reclamation proceedings against UK businesses/citizens with registered .eu domain names once there is more clarification on Brexit.
In the event of a no deal Brexit, the process will start almost immediately. While there will be the chance to appeal, it may be in vain for many UK companies/individuals. The situation with a managed withdrawal from the EU would be slightly different, although we are not sure exactly how as yet, but eventually UK companies/individuals will need to give up their .eu domain names. Is there a simple solution?
Proxy service to protect .eu domains
In recent months we have seen some interesting comments regarding the forthcoming reclamation of .eu domain names. Firstly, this process is perfectly legal. In fact, it is something which many countries have within the small print of their domain name extensions. Secondly, there is an interesting way around the potential loss of .eu domain names. How?
Transferring ownership to EU hosting companies
The vast majority of large UK hosting companies also have a presence in mainland Europe. We don’t expect this to change. In fact business will continue as usual, even after Brexit. Many are now offering what is known as a “proxy service” which would see the .eu domain names of UK-based clients being “sold” to their host provider. The domain names would be registered via one of the host companies EU offshoots. It therefore fulfills the rules that only EU registered individuals/businesses can own .eu domain names. So how would this benefit UK online entrepreneurs?
As a secondary arrangement, hosting companies would enter into an agreement with their customers to effectively lease what was their .eu domain name back to the client. The client would then operate their business on the .eu domain name as if nothing had changed. While some may question the legality of this process, it is perfectly legitimate.
Ownership of .eu domain names would be held by an EU offshoot of the hosting company and registered to a European Union address. Under a separate arrangement, the domain name would be leased back to the customer at an agreed rate and term. In many ways, renewal of this arrangement would be akin to renewing your domain name on a regular basis.
Many online businesses invested significant amounts of time and money into building a reputation and making their trademarks as visible and memorable as possible. At this moment in time, there are various trademark bodies dotted around the world which offer protection.
In a worst-case scenario, the UK would open its own trademark office and current UK trademarks registered with the European Union would simply be transferred on identical terms. Those businesses would need to re-register their trademarks with EU counterparts. Never-the-less, this should not be a major problem.
This will be a relief to many online entrepreneurs because very often logos and trademarks are what make them stand out from the competition. Having that protection taken away, or even an inability to trade within the European Union might reduce turnover.
When it comes to e-commerce there is no doubt that UK merchants are in for a relatively difficult few months/years. While issues such as GDPR are fairly straightforward, ensuring secure transactions for all customers, there will be shipping barriers; problems with EU domain names and UK-based e-commerce websites will also need to change their terms and conditions.
At this moment in time it is highly likely that the UK will broadly align itself with both the online and off-line business regulations of the European Union. Under what structure and to what extent remains to be seen because there is a potential positive to Brexit.
Under current trade regulations the UK is bound by all EU arrangements with countries around the world. This will change dramatically when the UK leaves the European Union and takes back control of its own worldwide trading agreements. There is the potential for markets to open up for UK businesses which have not been available in the past. This will take time, it will take investment but while many continue to focus on the negatives of Brexit, there are at least some positives.
Looking to the future
It will be interesting to see how the UK government looks to protect and guide UK-based online businesses. We know that e-commerce is the future, sales continue to grow but competition is intense.
At this moment in time it may be difficult to focus on the positives. Though restrictions on UK businesses dealing with EU clients would be replicated for EU businesses looking to deal with UK clients. We hope that UK and EU politicians are able to put in place an agreement which helps all parties.
A fall in trade would hit the EU to a greater extent in pounds. However, as a percentage of trade, EU trade for UK businesses is significant.