|This article needs additional citations for verification. (April 2009)|
Rip-off Britain refers to the phenomenon in which some products and services cost significantly more in the United Kingdom than in other places, especially other member states of the European Union and the United States, than a basic currency conversion would permit. The term was coined by the tabloid press in the late 1990s and sees particular usage in mass media when the pound sterling is strong, as this drives down other states' prices in pounds.
The phrase originated with a campaign by the Consumers' Association in 1998. It was aimed at lowering car prices in Britain; at the time, despite legislation outlawing the practice, British car prices were significantly higher than the EU average.
In 1999, the Consumers' Association hired a stand at the British International Motor Show, only revealing on press day its true purpose in doing so—to highlight high British car prices. The organizers of the show, the Society of Motor Manufacturers and Traders, decided not to fan the media flames by ejecting the Consumers' Association.
By this point, the phrase had already taken hold in the mass media, and it became a term in frequent use to describe anything that was wrong with Britain. It also proved to be one of the elements leading to a tipping point in the harmonisation of car prices within the EU. The campaign was devised by UK advertising agency Claydon Heeley, who are known for such "guerrilla marketing" work.
The level of indirect taxation applied to some products such as alcoholic drinks, tobacco, and petroleum may serve to disguise high profit margins by the retailer, but it may also work in the opposite direction, squeezing profits when there are other legal markets with lower taxation.
While the standard UK rate of Value Added Tax (VAT) of 20% is generally higher than US sales taxes, differences in prices are often far greater than this could account for.. The Crown Dependencies of Jersey and Guernsey are not part of the EU and Low Value Consignment Relief applies to imports. Retailers such as Play.com and Specsavers operate from Jersey or Guernsey specifically as a means of avoiding VAT.
In the UK, imported commercial goods valued up to £18 are exempt from VAT; for personal gifts, the exemption rises to £36. As of 1 December 2008, imports up to the value of £105 are not liable for UK customs duty.
Companies sometimes argue that some of their fixed costs are higher in the United Kingdom than elsewhere, such as for storage and distribution. The truthfulness of this defence varies from case to case. For example, the UK has around the fiftieth highest population density of any country in the world, eight times that of the US and over twice that of France, so transportation distances are unlikely to be a factor, and a parliamentary report concluded there was no great difference across EU states.
Differences in storage costs are difficult to quantify, since many goods are shipped just in time directly from the manufacturer to the consumer, or in the case of electronic goods and services, they may not be physically shipped at all, but delivered via the Internet.
Quality and safety regulations are roughly comparable between the markets discussed in this article, although some businesses argue that increasing safety regulation increases costs, which must be passed to the consumer. Retailers and manufacturers sometimes argue that legal requirements for guarantees and warranties differ between markets, and this must be factored into prices.
Shipping from abroad
Perceived or actual higher prices in the UK often have the effect of encouraging British consumers to order goods from the Internet, whether from UK businesses claiming to break a price cartel or directly from abroad, including via eBay and other online auction sites.
Most American Internet retailers ship directly to consumers in the UK which, assuming customs provisions are met, can provide a worthwhile alternative to higher UK prices. Many believe that competition from the Internet and the Eurozone general free trade will tend to normalize retail prices and put an end the UK being known as "Treasure Island". However, "customer not present" transactions can generally not be made for legally controlled products such as alcohol, tobacco, solvents, fuels, or medication.
Electrical and electronic products designed for the North American market may have to be converted to run on EU voltage and TV systems, annulling any benefit in reduced prices. Other products may also differ in specification, or they may not come with the same warranties or guarantees, making returning faulty goods difficult, or at least not cost effective. Furthermore, products for sale in the European Union should carry the CE mark for safety, but products purchased in the United States or designed for the US market are often supplied with other safety designations such as the UL listing.
Products and services delivered over the Internet do not face physical barriers for shipping the goods are eliminated,[clarification needed] so one might expect Internet-based markets to normalize across free trading countries.[dead link]
Apple's iTunes Store formerly operated a model in which purchases can only be made in a domain where the users' means of payment is registered. UK customers were therefore tied to the offerings in the UK iTunes Store, proving a disadvantage both in price and selection. On 9 January 2008, however, Apple conceded that this was unfair practice and promised to harmonise prices with Europe within six months, citing record labels' wholesale music prices as the reason.
- Regional lockout
- Value-Added-Tax-free imports from the Channel Islands
- Australia Tax: An identical observation by those in Australia, where goods sold in Australia cost much higher amounts that the same goods sold across Asia and the United States, even for items such as computer software which is sold via Digital Distribution.
- Suomi-lisä, the "Finland surcharge", occurs when a seller exploits the poor competition and high barriers to entry (due to regulation and taxation) in Finland to price a good higher (e.g. 51 € on PlayStation 3 vs. price in equally taxing Sweden); today applies especially to electronics, but used to refer to the high mortgage interest rates charged before late 1980s-early 1990s banking deregulation
- Duff, Mike (1 April 2009), "Is Britain Treasure Island?", Autocar, retrieved 2009-04-22
- Hall, Emma (5 September 1999), "Revealed: home truths about 'rip-off Britain'", The Independent, retrieved 2009-04-22
- Watts, Robert (6 Feb 2005), "Big retailers milk Jersey's VAT exemption", The Daily Telegraph, retrieved 2009-04-22
- Bowers, Simon (24 January 2009), "Brussels looks for lost VAT in the Channel", The Guardian, retrieved 2009-04-22
- Receiving gifts or buying goods from overseas, Royal Mail, retrieved 2009-04-22
- List of countries by population density
- House of Lords Select Committee on European Union (21 May 2003), "PART 3:KEY ISSUES (Competition)", Twenty-Fourth Report, The Stationery Office, retrieved 2009-04-22
- Response to DTI Consultation Document on Proposal for Revision of the EC General Product Safety Directive, Confederation of British Industry, July 2000, retrieved 2009-04-22
- Consumer Guarantees Directive, PC Association, retrieved 2009-04-22
- Leading Article (13 January 2008), "Rip-off Britain is back", The Sunday Times, retrieved 2009-04-22
- Cicutti, Nic (7 February 2007), Are Brits being ripped off?, MSN Money, retrieved 2009-04-22
- 'Rip-off' Britain investigated, BBC News, 20 September 2002, retrieved 2009-04-22
- Wallop, Harry; Derbyshire, David (January 2007, updated 19 April 2008), "Rip-off Britain back with a vengeance", The Daily Telegraph, retrieved 2009-04-22