Starting an import business in the UK

First published 19 December 2018 • Updated 12 November 2019

An importer selects locations from a map of the USA

Importing goods can widen your profit margins and give you a competitive edge. It could give you the opportunity to offer products that are otherwise not available, or sell them at a lower price. But as it’s less simple than buying from a UK-based supplier, it can be a costly process and it comes with more risks. Let’s weigh up the good and the bad of importing.

Why import?

Here are the four biggest reasons why you might consider importing goods or materials from outside the UK.

Boost profit margins

Businesses in other countries may be able to produce goods more cheaply than UK firms can, whether it’s because of natural resources, lower labour costs or more efficient equipment. Importing them could be more cost-effective.

Get hold of non-UK products

Countries are limited by what their land and people can produce. There may be a special food, material, piece of equipment etc. abroad that you need. You can also buy overseas products to diversify your product offering and put your business ahead of the competition.

Better quality

In some instances the product quality is better in other countries. For example, in New Zealand and Australia the merino wool is second to none. If you’re promising a top-quality product, sourcing the best supplies could put you ahead of the game.

Advantageous trade agreements

You might find that trade agreements with certain countries mean you can import goods with low tariffs, taxes and duties. These can swing in your favour and make it more cost-effective to get hold of certain goods. Some of these advantages may be lost however if the UK leaves the EU.

How do you import goods?

When you decide to import, you need to work out the most reliable and cost-effective way of getting the goods to you. Here are your basic options.

Land freight

Transporting goods by road or rail can be both cost-effective and efficient. Good infrastructure between the UK and Europe means it’s possible to transport large quantities of items. Road freight is flexible as it can carry large volumes and go to any destination, but you’ll have to think about fluctuations in fuel prices and possible delays. Rail is generally more expensive and less flexible, but it is the more eco-friendly option.

Sea freight

Lots of items between Asia and the UK are transported by sea as it’s relatively cheap to do – up to six times cheaper than air. You’ll usually take either a full or half container (between 20-45 feet long) and what you pay is generally based on the volume rather than weight.

Air freight

This is typically the most expensive option but it is also the quickest. What you pay is worked out by weight. For that reason, it’s only really suited to small high-value items or those needed urgently. You’ll either buy a small amount of space on a passenger jet or freight plane (those dedicated to transporting imports and exports), or you can charter the entire plane if you have a lot of goods to transport.

It’s important to know that transportation costs are factored into the amount you pay in import duty and, additionally, the cost of VAT. That means if you pay more for transport, you’ll also pay more in duties.

What to be aware of when importing

With lots of links in the chain, there are various costs and logistics that could make it difficult to import your goods. Here’s what you need to plan for.

Product standards

Anything you import must meet UK quality guidelines for it to be legal to sell them. They also need to meet your own standards, for example, electrical components need to work in your machines. You can minimise the risk of poor-quality products by ordering samples in advance and submitting them for testing at accredited UK centres.

Suppliers

You’ll want to know that your suppliers are reliable, so visit them if possible – this is very common for businesses to do when they’re importing. Try to find out more about their management systems to make sure they’re following ethical working practices, as this could affect your reputation. You also need to find out if they outsource any of their supplies and if they’re authentic. By carrying out these checks, you can reduce the risk of receiving poor quality products.

Supply chain

As your products will be travelling from far away, a number of companies will play a part in getting them to you. Make sure you have a contract in place that sets out who is responsible for what. Leave breathing space in your timeframe for any delays.

Risk of the country

Whether there are language barriers, different ways of doing business, export controls or political and economic problems, there are a number of reasons it might be difficult to import from certain countries. To mitigate this risk, be sure to conduct thorough market research first.

Exchange rates

Keep an eye on the exchange rate as fluctuations could hugely affect your profit margins. Forecasting research can help you stay ahead of the game and alter where you import from if necessary.

Customs and licences

Anything you buy from overseas is checked by customs in the UK to make sure it is legally allowed to come into the country. If it’s all okay, you’ll have to pay duty (otherwise known as custom charges) on what you’ve imported. You may also need to get a licence for certain goods, including those used for the military, plants & animals, chemicals, medicines and some technologies. Check all this first and work the costs into your budget.

VAT

Most goods imported from outside the EU come with an additional VAT charge of 20 per cent. This is calculated on the full value, which includes the price of the product, postage, packaging, insurance and any duty you’ve paid. You can usually build the cost of VAT into the price you charge for items. If the UK stays inside the EU VAT area then current arrangements will continue to apply – if it does not then things will change.

Insurance

Although it’s not always a legal requirement, it’s highly recommended that you take out insurance when you import goods (don’t just rely on the other party’s cover). Often called cargo insurance, it covers the cost of damage or loss of goods. In some cases, might even need insurance in order to sign contracts with certain suppliers. There are a number of insurances you can take out as an importer, including policies that cover political risks, faults with products and currency conversion losses.

Importing does carry risk, but it can also bring substantial rewards for your business. To ensure your imports enterprise is a success, do your research and seek expert advice, including from your accountant.

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About the author
Nick Green
Nick Green
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.