Five years have passed since the UK left the European Union, and the impact on its retail sector continues to be felt. New data by Retail Economics and Tradebyte reveals almost £5.9 billion drop in British retail sales to the EU since Brexit. This anniversary serves as a stark reminder of the challenges faced by UK businesses and the evolving strategies they are adopting to survive and thrive.

Dip in British exports, retail sales

The ‘From Brexit to Breakthrough - Market Expansion for UK Brands’ report, initially published in June 2024, reveals a concerning picture. Clothing exports have been decimated, falling over 60 per cent from £7.4 billion in 2019 to just £2.7 billion in 2023. This decline underscores the sector's vulnerability to post-Brexit trade barriers. The composition of UK exports has also shifted significantly. Apparel, once a leading export, has been overtaken by health and beauty, electrical, and DIY and gardening products, which now constitute three-quarters of UK non-food retail exports to the EU. Even these sectors have not been immune to the downturn, with the overall value of non-food retail exports falling nearly 18 per cent since 2019, despite the mitigating effect of inflation.

Trade frictions a bane

Beyond the headline figures, the report highlights the significant role of Brexit-related trade frictions. Increased logistics costs, complex customs procedures, and regulatory hurdles are hindering international online retail opportunities for UK brands. These complexities are estimated to be costing EU economies a staggering £322.6 billion. The added bureaucracy and expense have made it significantly more difficult for UK businesses to compete in the lucrative European e-commerce market.

UK brands take the online route

However, amidst these challenges, a new avenue for growth has emerged: online marketplaces. These platforms have become a vital lifeline for UK brands seeking to regain lost ground in the European market. With online marketplaces now accounting for at least £133 billion (two-fifths) of EU e-commerce, they offer a significant opportunity for UK retailers to access a vast customer base.

“Five years after Brexit, UK retailers are still navigating its long-term effects, particularly when it comes to trading with EU consumers,” says Richard Lim, CEO, Retail Economics. “Many have experienced a significant drop in trade flows, making it harder to maintain connections with key European markets.” Lim emphasizes the crucial role of digital marketplaces in mitigating these challenges. “For brands looking to expand internationally, digital marketplaces have become an essential lifeline, providing a practical route to reach global audiences while overcoming complex trade barriers. By embracing these platforms, retailers can mitigate some of the challenges posed by Brexit and refocus on growth opportunities in an increasingly competitive global market.”

Alexander Otto, Head of Corporate Relations at Tradebyte agrees and says, “Brexit has transformed the UK retail landscape, creating significant obstacles for UK brands and retailers aiming to expand in Europe, and making it far harder for them to tap into the flourishing EU e-commerce market. Online marketplaces now represent a platform for innovation and a scalable, low-risk path to reach affluent and younger EU consumers across a range of markets. They have emerged as crucial platforms to offset the challenges of Brexit and offer vital growth drivers in a competitive global market.”

The data clearly indicates while Brexit has undoubtedly created significant headwinds for UK retailers, particularly those reliant on EU trade, online marketplaces offer a potential pathway to recovery and growth. The shift towards digital platforms is a strategic adaptation in the post-Brexit scenario, allowing businesses to navigate complex trade barriers and tap into the vast potential of the European e-commerce market. The next five years will be crucial in determining whether this strategy can fully offset the negative impacts of Brexit and pave the way for a more resilient and globally competitive UK retail sector.