Brexit has made it hard for European companies looking to trade into the UK. This is especially true of businesses that were used to shipping directly to end consumers overseas. Now they have all sorts of issues with import VAT and, unless they can register for VAT in the EU, there is no way around this. This has, of course, put many companies off and they have simply ceased shipping to consumers in the UK
We at The Fulfilment People have acquired customers that are looking to get back into the British market post Brexit. Shipping directly to consumers from the EU is problematic, given that the end user will need to pay import VAT and all that will need to be tracked. A solution to this is to import the product to a 3PL provider, sort out the import VAT, and then ship to UK customers from that UK warehouse. If the company doing this is registered for VAT in the UK, all import VAT can be offset against the VAT collected at the point of sale. In effect this will now work exactly as if the company had an operation in the UK.
There are four key benefits of EU companies using UK 3PL providers:
- You can act as if you have UK operations
By outsourcing warehousing and logistics to a UK provider European companies can “act as if” they have operations here. This is a potential Brexit beating solution for many EU businesses still keen to do business in good old Blighty.
- You can reduce upfront investment
Using a 3PL provider reduces the investment and risk associated with setting up a warehouse and logistics operation directly in the UK. For many SME’s the cost of directly expanding operations into the UK would be overwhelming, especially in uncertain economic times. - You reduce risk
With a 3PL provider you don’t need to guess how much capacity you need. The service will scale as you grow. If warehousing/logistics are done it in house then it will very important to accurately predict how much business the company will get from the UK market as this will determine the size of the warehouse required. This obviously presents risk because what if the sales are less than anticipated? With 3PL that does not matter as the service just scales granularly as sales grow. - You get peace of mind over red tape.
Regardless the rhetoric about “frictionless boarders”. the reality is that there is now some friction. There is paper work and red tape to navigate. A 3PL provider will deal with every day and have a great wealth of experience to help navigate the system when things go wrong. This gives peace of mind.
Conclusions
In the current political climate, we will be living with the effects of Brexit for many years. It is unlikely that any sort of meaningful customs union will be in place between the UK and the EU in the next 5 years. During that time a good UK based 3PL provider can help EU companies looking to sell their goods into the lucrative UK market. At TFP we remain ready and willing to help our European cousins navigate this post Brexit world.