Article 50 was triggered on the 29th of March, setting in motion Britain exit from the EU. But – despite Theresa May’s “Brexit means Brexit” slogan – most of the British public aren’t all that sure what the landmark political move will mean for them. For ecommerce business owners, it’s important to know what the future holds so you can plan ahead. Don’t worry – we’re on hand to help. This post – the first of two – will explore what Brexit means for the future of your business.
First things first, we have to look at the immediate impact of the Brexit vote on the British currency. When the pound is worth less, it costs more to buy materials, products or services from abroad. In 2015, pre-referendum, the pound was steadily worth about 1.35 times the Euro, and dropped to just below 1.3 in the months leading up to the vote. However, when the result was confirmed on June 24th, the rate plummeted to around 1.23.
Since then, it has slowly dropped further and settled at around 1.15. Why? It’s simply down to uncertainty. When a country’s future is uncertain, for whatever reason, investors have to consider the worst-case scenario. The period between the vote and the triggering of article 50 is the most uncertain of all, with no negotiations having occurred, which is why the pound has dropped so much in value.
According to Richard Falkenhäll, head of foreign exchange strategy at Morgan Stanley, the currency has become undervalued. “Most of Sterling’s depreciation since the British government announced plans in late 2015 to hold a referendum… should disappear in the very long-term,” he explains.
But for the time being, the lower value of the pound has some advantages for ecommerce businesses. The Centre for Retail Research highlights that the fall in the pound actually gives British exporters the financial edge in EU markets. Because the conversion rates will favour foreign currencies, British products and services will become cheaper than their EU counterparts.
Ask Leave voters for their reasons, and most will cite the removal of unnecessary laws and regulations. The EU has several rules covering all aspects of trade, with the curvature of bananas hilariously ending up at the centre of the national debate. Bendy bananas aside, the removal of these regulations is potentially another benefit to ecommerce businesses.
Firstly, it could see the end of the E-Commerce Directive being implemented in Britain. Specifically targeting ecommerce companies, the directive “establishes harmonised rules on issues such as the transparency and information requirements for online service providers, commercial communications, electronic contracts and limitations of liability of intermediary service providers.” In other words, it’s a bit of extra hassle for ecommerce businesses.
Whatever the outcome of Brexit, you can bolster your business with a swift and effective Magento e-commerce site. Fluid Digital are e-commerce specialists, with unrivalled experience and creativity in Magento development. We can provide you with a flawless e-commerce site that attracts visitors and generates sales. Call us on 0161 452 1350 or use our online enquiry form for more information on how we can help your e-commerce business thrive.