Businesses Abandon Mainland Europe to Focus on Post-Brexit Britain

Brexit, UK, EU, business, Cazoo

In the run-up to the 2016 Brexit referendum, one of the key arguments used by the “Leave” campaign was that freedom from the influence of Brussels would mean the U.K. could forge its own path on policy issues such as international trade and business regulation.

On those fronts, proponents of Brexit made the case that free trade agreements and deregulation will be good for business.

To counter this, those that voted to remain in the European Union pointed out that the U.K. was already part of the largest free trade bloc in the world, noting that any deregulation that gives the country an unfair advantage over the EU will lead to tariffs as outlined in the Brexit agreement.

Of course, there is no simple way to assess the business friendliness of a country, let alone compare present-day Britain to some parallel universe in which Brexit never happened. However, an important factor in any assessment must be how international businesses approach the U.K.

In the last month, two such international businesses have stated their intention to exit EU markets while simultaneously doubling down on opportunities in the U.K.

As was widely reported at the end of August, U.S.-based Q-commerce firm Gopuff is winding down its operations in Spain as part of plans to dial back its European expansion plans. Citing people familiar with the matter, a Bloomberg report stated that the move will allow the company to concentrate its regional focus on the U.K. market.

In another strategic pivot from the EU to the U.K., British online car retailer Cazoo announced on Thursday (Sept. 9) that it will be pulling out of the EU entirely. The platform launched in France and Germany only last year, and launched in Spain and Italy as recently as May and June of this year, respectively.

See also: Cazoo Pulls Out of EU to Focus on UK Market

Explaining the decision, Cazoo highlighted its ambition to become profitable by the end of the year, suggesting that its EU operations were draining cash while the more mature U.K. business has proven to be sustainable.

For both Gopuff and Cazoo, the business rationale behind their decisions appears to be numbers-based. As Bloomberg reported, the U.K. is one of Gopuff’s fastest growing markets, with revenue increasing by 30% each month. Cazoo, meanwhile, stated that in the year to July, it doubled its retail sales in the country.

But why have these businesses been able to generate enough growth and revenue in the U.K. while failing to repeat the success in other markets?

For Cazoo, a company that was founded in the U.K. in 2019, the answer might simply be that pressure from shareholders to commit to profitability by the end of the year did not take into account how young its non-U.K. operations are and the time required to move them from the current growth stage.

For Gopuff, the reasons for choosing the U.K. over Spain are more complicated. As PYMNTS has reported, London is one of the big prizes for Q-commerce globally, and compared to Spain, the U.K.’s employment law is more accommodating to the gig economy model favored by the likes of Gopuff.

Learn more: Battle for London Rages on as Q-Commerce Eyes Path to Profit

Finally, while city councils in France and the Netherlands have taken a combative stance against the proliferation of dark stores, so far there appears to be no such backlash in the U.K.

A Business-Friendly Environment?

Ultimately, regardless of the regulatory environment, the U.K. is an attractive market for businesses due to the size of its economy and the purchasing power of its consumers. Yet government policy and economic health are bound together.

On the regulatory front, new Prime Minister Liz Truss’ proposed timetable for scrapping the EU legislation that remains in U.K. law is likely to face strong opposition, even from within her own party.

Related: New UK Prime Minister Inherits Worsening Crisis, Skyrocketing Energy Bills

Truss’s plan for a 2023 deadline is even more ambitious than the 2026 deadline that former Brexit Opportunities Minister Jacob Rees-Mogg pushed for in the previous government — and even that plan was condemned as unfeasible by several of Rees-Mogg’s ministerial colleagues.

Much of the concern over rushing the process of amending legislation arises from a fear that deregulation would end up watering down workers’ rights. Last week, the Times reported that Truss was considering a shake-up of EU-era employment law that the newspaper called “a bonfire of workers’ rights.”

From a trade perspective, there is also the concern that if the U.K. moves too far on things like minimum wage and working hours, it risks the EU imposing retaliatory tariffs.

Read more: Potential BoE Shakeup in the Cards as New UK Chancellor Seeks to Control Inflation

So, if the new government wants to continue to attract international businesses and support homegrown innovation, it needs to recognize that everyday consumers drive the economy and deregulation cannot come at the cost of Brits’ ability to earn a living. At present, that ability is even more critical with the country facing its worst inflation in forty years.

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