We always knew that there would be Brexit consequences for our business. Leading up to Christmas, we prepared as well as we possibly could have given minimal information on the outcome of the trade negotiations between the UK and the EU. Yet still, the complexity of the resulting deal took us by complete surprise when the calendar hit the 1st of January 2021.
Having built a solid following in the EU over the past few years, almost 30% of our turnover in 2020 came from online sales to the EU. We had assumed that there would be some kind of deal – and that worst case it would be like shipping online order to US customers (essentially the same as shipping within the UK assuming thresholds are not breached).
Imagine the frustration when we had to start 2021 by cancelling several orders to EU customers as the reality – and complexity - of Brexit dawned on us. The free trade deal that we had heard the Prime Minister talk about was not in the least bit free trade for a business like VILDNIS. We were now faced with duties, VAT, Brexit surcharges for taking goods through custom and handling fees etc to pay.
We have spent countless days since the 1st of January trying to make sense of it all and figuring out how we can continue to sell and ship to EU consumers – without losing money on each and every transaction. In doing so, we spoke with a friendly EU transition advisor from the Department for International Trade who confirmed our conclusions….
…. which is that, sadly there is no easy way around it and we will likely lose the majority of our business with the EU until we grow big enough to hold stock in the EU as well as UK.
And this is why we contacted Fashion Roundtable to tell them about our findings. Fashion Roundtable in turn sent an open letter to the UK government with 450 signatories (including VILDNIS), requesting a meeting on behalf of the fashion industry. At the time of writing this, 19 days have gone by without a response from the government.
Meanwhile, if you were checking out the news between the 19th-22nd January, you may have seen/heard Vildnis in several national media (BBC TV/Radio/website, Daily Mail and Independent). These media appearances sparked a reaction from the government and we received a pleasant but generic and unhelpful email with the usual links to HMRC webinars etc. In return, we responded politely with some suggestions on how the government can improve the situation. The Cabinet Office has just replied at the time of writing with what is essentially another generic email.
In the meantime, from conversations with owners of other small fashion brands in the UK, it has become clear that there is a lot of confusion related to VAT, duty and surcharges - and no amount of (fairly useless) HMRC webinars can make up for that.
So… in collaboration with sustainable living platform Live Frankly, we’ve created a layman’s guide for small UK businesses selling online directly to EU consumers based on our Brexit related findings. You can find it here.
Please note, though, that we are just another small business trying to make sense of it all. It’s written from the perspective of a small VAT registered business importing some of its products outside of the UK/EU. It’s possible that we have missed something (we kind of hope so!) and any feedback is very welcome at firstname.lastname@example.org .
At the time of writing, we are waiting for an account to be set up with our courier of choice so they can handle VAT and duty payments on our behalf. This way we can soon consider restarting shipping to our EU customers again. Yay.
In doing so we will likely have to absorb 12% duty on the products (unfairly since we have already paid it once on import…) and will then need to figure out what to do with any returns (to avoid paying the duty for a third time)…. but at least it’s a start.
Indeed, this returns issue is actually one of the main sticking points for the industry. You may have read about big brands preferring to collect and then burn their returns rather than having them shipped back to the UK. Here’s why; it’s too expensive. As a sustainable fashion brand, we’ll never engage in such unsustainable activities. We’ll get the goods back into circulation somehow, but as it stands, as far we understand it, we will incur a Brexit-triggered non-refundable duty charge of 24% of the items’ value (in addition to shipping and restocking fees) on any items returned to the UK, despite ending up not selling them.
Here’s to hoping that the government is working hard in the background to make trade with our EU friends easier. Now is not the time to make small sustainable fashion brands give up. On the contrary, now is the time to support and encourage any brand that wants to make a positive difference to the planet.
PS: If you want to actively do something to help, please consider emailing your MP using this template from Fashion Roundtable.