Mehul Lodhiya, Jewellery Wholesaler and UK’s Honorary Coordinator for The GJEPC Expresses His Views on The Jewellery Market in The UK Post Brexit.
How would the changes in the VAT after Brexit will influence the UK Jewellers?
The change in the new VAT rules is a boost to the industry as the importers are allowed to postpone their VAT payments. In simple words, before when we use to import, we had to pay the VAT upfront but with this you can pay VAT after you sell the goods and collect from the customer. You can also get your postponed import VAT statement online. This reduces the investment value in a big way as the VAT is 20 % or also you can call for 20% more of merchandise. As a matter of fact, this is a boost for every industry related to imports. Also the import duty has been reduced to 2% from 2.5. However, imports from EU would be duty free provided it has the proof of origin of the EU.
The only setback UK Jewellers will have, is less of overseas buyers as tax free for overseas visitors is now abolished to no VAT refund to overseas visitors.
How are Brexit trade rules creating barriers to the trade in the EU?
This is still too early to completely understand the impact on all sectors after the Brexit. The main reason is the trade is at standstill because of the Pandemic still after the Brexit.
However, the UK has reached a very positive trade agreement with the EU that is in effect from 1 January 2021. This agreement establishes zero tariffs or quotas on trade between the UK and the EU, where goods meet the relevant rules of origin. As we all know Brexit was a big move, the Brexit trade agreement with the European union will initially cause few problems for companies in all the sectors. There will have to be two custom clearances now, one for exiting the UK and second for importing in the EU and vice versa. Though it will have more paperwork to be done for both exports and imports but I believe eventually it will be very smooth.
What is the reason of strengthening of GBP even during such a long pandemic and 3rd major lockdown in the UK and how it will affect the jewellery industry?
Very true as soon as the trade deal was struck on Christmas Eve 2020, the GBP rallied and a bit before in anticipation of good and positive trade deal. Had the pandemic ended, it would have probably gone much stronger. The Brexit was hanging around the GBP’s neck for over 5 years and ultimately it ended positively. This will be good not only for the jewellery industry but will boost all sectors. Only obstacle GBP would face in the coming months is negative interest rates from the Bank of England. As it is a general thumb rule, when the interest rates are cut, the currency usually depreciates in value. Though as of now we have 0.10 % interest rates maintained by the BOE, they may reduce to 0% or could even be negative. This would be because of the severe damage done to the economy by this pandemic and 3rd lockdown.
How has Britain’s 3rd lockdown impacted high-end UK jewellery retailers?
Yes, it has really impacted very badly. Not only the high end retailers but the industry as a whole has been adversely affected. Every retail sector is completely closed other than essentials. It is worth noting and should be highly appreciated that the government has given tremendous financial aids to the citizens. The corona virus job retention scheme which immediately started after the first lockdown has been extended till 30th April 2021. As per this scheme every employee who cannot go to their respective jobs gets paid 80% of their salary with the maximum limit of £2500. There are plenty of other grants and one-year interest free loans were and are given to the companies financially affected by the pandemic.
Have the UK jewellers leveraged online platforms in the post-covid world?
Yes, they have for sure. As in the UK the online jewellery business is not as popular as in the US, jewellers were less prepared for the online trading. However, this pandemic has given them the chance to realise how important is to go online. Even lot of small retailers have started updating their websites. The jewellers who already had online platforms definitely had upper hand.
What do you think about our industry post-covid?
Post-covid would be very positive for our industry. As there were thousands of small functions and weddings either cancelled or postponed because of pandemic and they will be rearranged after covid which will create a huge demand in the jewellery industry. Also there is a huge Asian community who use to travel to India, Dubai, Bangladesh and few more countries to specially buy jewellery for weddings and as there will be a fall in the percentage of travel at least in the coming year, they will end up buying from the UK only. Overall we are very positive for the business in the coming years.