Brexit offers lower prices at UK shops for international shoppers

The UK’s decision via referendum to leave the EU will have mixed effects on shopping patterns for international shoppers. Whilst it is not known yet exactly how and when the UK will leave the UK, and what the terms of trade will be between the UK, the EU and the rest of the world, it is possible to make some assumptions and examine the outcomes.

Immediately after the Brexit vote result was announced, there was a large drop in the value of the pound or sterling. We talked about this in How will Brexit affect international shoppers. 

Now it has happened we can see if what we wrote holds true and what else may happen.

Fall in the value of Sterling

Sterling has dropped to a 31 year low against the US Dollar to a rate not seen since 1985. Since the Brexit vote sterling has dropped over 15%, it is unclear if it will keep dropping or return to its previous levels. Goldman Sachs had predicted a fall of 20% and it does seem likely that this size of drop will remain.

Sterling has dropped against the Euro and other currencies like the Australian Dollar and NZ Dollar too. So what does this mean for international shoppers wishing to buy from UK shops?

A fall in sterling makes products bought in the UK from abroad cheaper. So savvy overseas shoppers should be able to find some real bargains, perhaps 15-20% cheaper if they buy from UK shops.

Of course, this also works the other way round too. So UK shoppers now have a weaker currency and so products bought from overseas will be more expensive. Not so good for UK shoppers.

Other ways Brexit will affect shoppers is if trade tariffs change, leaving the EU means having to renegotiate trade deals. If the UK is able to negotiate lower trade tariffs then overseas shopping will be cheaper as there will be less import duty to pay. But the EU may raise import duty to protect their market and that could be bad as import taxes will increase, although the silver lining is that this will be offset by the weakening currency.

VAT applied to EU purchases

Leaving the EU may also mean that VAT will be applied to purchases from the EU, this is currently 20% in the UK.

It is still early days to know exactly what will happen, but reappointing a new Prime Minister and the government and Bank of England making a clear case for free trade and open for business should help to assuage some worries that shoppers might have.

If the UK can become a free trading country with little or no barriers to trade then this should make buying from and to the UK more attractive and easier opening up new markets outside of the EU to international shoppers.