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Brexit: impact on retail market

There is still a spectre hanging over the United Kingdom that, as a result of a lack of agreement with the European Union. There will be a so-called hard Brexit, which means that United Kingdom will leave the European Union without pre-established rules. This scenario is a serious threat to trade between the UK and the EU.

Brexit: what happens now?

The United Kingdom is once again postponing the country’s exit from the European Union. The amendment adopted on Saturday provides for the suspension of support for an agreement regulating Britain’s exit from the European Union until Parliament adopts a package of laws regulating the details of Britain’s exit from the Community.

The agreement would allow a regulated Brexit and a transitional period until the end of 2020. During this period, the existing principles of trade in goods and economic cooperation between the EU and the United Kingdom would be preserved.

However, the spectre still hangs over the United Kingdom that, as a result of a failure to reach agreement with the European Union, the so-called hard Brexit, that is, the UK’s exit from the EU without an agreement, will be carried out.

Rules for leaving the UK from EU

After Britain’s unregulated exit from the European Union, the country’s economic relations with the Community will be governed by the rules developed by the World Trade Organisation (WTO), and the United Kingdom will be treated as a third country. As a result, border controls and customs duties will come into force in mutual relations. This scenario will involve, among others, the introduction of customs duties in mutual trade, changes in VAT settlements and customs, sanitary and veterinary controls. What will be connected with numerous difficulties for entrepreneurs who want to continue to maintain trade relations with this country.

In turn, the agreement would allow for a regulated exit from the EU and a transitional period until the end of 2020. During this period, the existing principles of trade in goods and economic cooperation between the United Kingdom and the EU countries will be maintained. The transition period itself will serve the purpose of developing and concluding a free trade agreement, as a result of which there will be no duties or charges in mutual relations.

What will be the impact of Brexit on the retail market?

The worst scenario for economic exchange with Poland is the entry into force of the so-called hard Brexit. It will have a negative impact on the production and distribution of goods and may even cause temporary shortages in the market for certain goods, such as food or medicines.

According to GUS, in 2017 the number one goods exported to Great Britain were machinery, equipment and transport equipment (PLN 22.2 bn) and food and live animals (PLN 9.4 bn). On the other hand, the most willingly imported products from the Islands are also machines, devices and transport equipment (PLN 83.3 bn), as well as chemicals and related products (PLN 5.0 bn). Moreover, the value of such categories as food and live animals, beverages and tobacco in 2017 reached PLN 1.7 bn and PLN 0.5 bn, respectively.

The increase in prices caused by Brexit will be felt most by the British people. However, it is also expected that British goods on our shelves, such as British whiskey, will become more expensive. What is more, the cost of shopping online in the UK will also rise, caused by the obligation to pay import tax and customs duties.

The UK is currently the third largest trading partner for Poland in terms of value. However, if this scenario is fulfilled, it could jeopardise trade between the Islands and EU countries. Consequently, the UK’s position in trade with Poland should be changed.

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