No-Deal Brexit Could Cause Grey Market Retail ‘Explosion’

In the case of a no-deal Brexit, an “explosion” in grey market goods could occur per a U.K. retail expert. The term “grey market” references legitimate items sold through legal but unauthorized sellers; by contrast, a “black market” describes counterfeit products or illegally traded scarce goods, CNBC reported.

Companies prefer to sell items via authorized sellers or licensing deals as it offers them greater control when it comes to the pricing and presentation of products. If items are sold through unauthorized but legal channels on the grey market, they could be sold at discounted rates.

Geometry U.K. Chief Executive Michelle Whelan told CNBC that the price of some legitimate items could increase by over 10 percent due to scarcity in the case of Britain exiting the European Union without a deal. The executive told the outlet by email, “Here in the U.K., we’re used to open markets where we purchase goods from known and approved channels. With a ‘no deal’ there is a huge opportunity for a grey market explosion.”

While brands often make products that are designed for certain markets, grey market resellers may purchase goods in a particular nation only to sell them in another country. In 2012, for instance, clothing from Abercrombie & Fitch showed up for sale on Indian websites despite the fact that the brand didn’t officially have a presence in the country per the report. The sellers could have purchased legitimate products in bulk to have the ability to sell them at prices that are marked down.

In separate news related to Brexit, The International Monetary Fund (IMF) warned in April that a no-deal Brexit would sacrifice between two and three years of normal economic growth for Britain’s economy between now and 2021. At the time, it was noted that even with an orderly Brexit without a deal, the economy would take a large hit, with 3.5 percent growth less than would be the case under a better Brexit.