What the Brexit Deal Means for the American Shopper
A Brexit deal has just been announced by the U.K. government and the European Union, with both sides touting it as “fair” and offering a promise of “certainty.” For designers, the bigger concern may be a lesser-known change affecting VAT (value added tax) beginning January 1.
On Christmas Eve, Britain’s Prime Minister Boris Johnson said of the agreement: “We have completed the biggest trade deal yet, worth £660 billion. A comprehensive Canada-style free trade deal between the U.K. and the EU, a deal that will protect jobs across this country. A deal that will allow U.K. goods and components to be sold without tariffs and without quotas in the EU market.”
The same day, EU President Ursula von der Leyen described the protracted, over-four-years-long negotiations as “a long and winding road.” She added: “But we have got a good deal to show for it. It is fair and balanced.” Whether the reference to The Beatles song was intentional is unclear.
Also unclear are the exact repercussions at this stage. For U.S. interior designers who might shop for antique and/or luxury items in the U.K., at first glance they will be able to carry on as normal. No tariffs or quotas on goods suggests that retail prices of items such as furniture or design pieces moving between Britain and the EU will not be affected.
Helen Dickinson, chief executive of the British Retail Consortium—whose members deliver an estimated £180 billion in annual retail sales—said in a statement: “The U.K. and EU governments have taken a crucially important step in agreeing a zero-tariff deal, to the benefit of customers all over Europe. The BRC and the rest of the retail industry will be scrutinizing the terms of this deal in the coming days.”
Lawmakers will be doing the same before giving the agreement their seal of approval at a parliamentary vote, expected to take place on December 30.
Brexit may not have a pricing impact on retail purchases, but new export rules on VAT—a sales tax that is currently 20%—will affect Americans who come across the pond looking for items to carry back in their luggage. From January 1, airside tax-free sales and also the VAT Retail Export Scheme are both being withdrawn. This means no more lucrative tax-free savings at the airport on luxury items, and no tax rebate for goods bought in the local market when departing Britain.
An important exception however is Northern Ireland. The U.K. region has a land border with Ireland and—to avoid border checks—it will continue to follow many of the EU’s rules next year. Current tax-free rules and the export scheme will also continue to apply respectively for goods bought at airports and ports, and in downtown stores.
The good news is that for anyone buying larger items to be shipped home to the U.S., the U.K. government says shoppers can still purchase those goods VAT-free from Great Britain if the retailer ships them directly to your address.
At a broader level, there could be halcyon days ahead. Susannah Streeter, senior investment and markets analyst at financial services company Hargreaves Lansdown, believes the Brexit deal could rev up the economy—despite the ravages of COVID-19. She wrote in the Daily Mail: “Optimism is set to seep back into boardrooms now that a deal has been done and vaccines continue to be rolled out. This surge in confidence would help the U.K. overcome the 1% hit to GDP, which the Bank of England predicts will come as the price for leaving the EU even with a deal.”
The added combination of a rebound in global growth and no further pandemic setbacks “could herald in a new Roaring Twenties era, mirroring the decade-long upswing following the economic pain of World War 1,” she added. The period also unleashed rapid societal and cultural change and key movements such as Art Deco. If something similar, albeit on a smaller regional scale, were to happen, the pickings for the design community in both the U.K. and Europe could be rich.