Rip-off Britain

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Rip-off Britain is an expression used by some to refer to the phenomenon in which some products and services cost significantly more in the United Kingdom than in other countries, especially 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.

Origin[edit]

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.[1]

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.[citation needed] It also proved to be one of the elements leading to a tipping point in the harmonisation of car prices within the EU.[citation needed] The campaign was devised by UK advertising agency Claydon Heeley, who are known for such "guerrilla marketing" work.

Possible causes[edit]

Taxation[edit]

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 per cent is generally triple or more that of US sales taxes, differences in prices can be far greater than this could account for.[citation needed]. The Crown Dependencies of Jersey and Guernsey are not part of the EU and Low Value Consignment Relief applied to imports. Retailers such as Play.com and Specsavers operated from Jersey or Guernsey specifically as a means of avoiding VAT.[2][3]

In the UK, imported commercial goods valued up to £15 are exempt from VAT; for personal gifts, the exemption rises to £36. As of July 2014, imports up to the value of £135 are not liable for UK customs duty.[4]

Business costs[edit]

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.[citation needed] 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,[5] so transportation distances are unlikely to be a factor, and a parliamentary report concluded there was no great difference across EU states.[6]

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.

Over-regulation[edit]

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.[7] Retailers and manufacturers sometimes argue that legal requirements for guarantees and warranties differ between markets, and this must be factored into prices.[8]

Easy conversion[edit]

Simply converting $1 to £1 is one reason for the price increase. For example, Wikipedia donations page asking for donations gives the following options,

US customers: "This year, please consider making a donation of $5, $20, $50 or whatever you can to protect and sustain Wikipedia."

UK customers: "This year, please consider making a donation of £5, £20, £50 or whatever you can to protect and sustain Wikipedia."

Discussing why personal computers cost more in the UK than in the US, New Scientist stated in 1977 that "the price of an American kit in dollars rapidly translates into the same figure in pounds sterling by the time it has reached the shores of Britain".[9] This also applies to digital downloads where the price is not a round number and where the costs are the same. "The ever popular method of simply swapping the $ sign for a £ sign sees a monthly subscription to Spotify priced at $9.99 in the US and £9.99 in the UK", Which? magazine stated in 2013.[10]

At its launch, Microsoft Windows Vista had a suggested retail price of $249 (£127) in the United States and £249 ($487) in the United Kingdom. This made it almost twice as expensive to buy in the UK than in the U.S.[11]

Remedies[edit]

Shipping from abroad[edit]

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,[4] can provide a worthwhile alternative to higher UK prices. Many believe[who?] 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".[12] 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.

Internet delivery[edit]

Products and services delivered over the Internet do not face physical barriers for shipping the goods, so one might expect Internet-based markets to normalize across free trading countries.[13]

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[citation needed] and promised to harmonise prices with Europe within six months,[citation needed] citing record labels' wholesale music prices as the reason.[citation needed]

See also[edit]

References[edit]

  1. ^ Hall, Emma (5 September 1999), "Revealed: home truths about 'rip-off Britain'", The Independent, retrieved 22 April 2009
  2. ^ Watts, Robert (6 February 2005), "Big retailers milk Jersey's VAT exemption", The Daily Telegraph, retrieved 22 April 2009
  3. ^ Bowers, Simon (24 January 2009), "Brussels looks for lost VAT in the Channel", The Guardian, retrieved 22 April 2009
  4. ^ a b "Receiving mail from abroad", Royal Mail, retrieved 1 July 2014
  5. ^ List of countries by population density
  6. ^ House of Lords Select Committee on European Union (21 May 2003), "PART 3:KEY ISSUES (Competition)", Twenty-Fourth Report, The Stationery Office, archived from the original on 5 June 2011, retrieved 22 April 2009CS1 maint: uses authors parameter (link)
  7. ^ Response to DTI Consultation Document on Proposal for Revision of the EC General Product Safety Directive (PDF), Confederation of British Industry, July 2000, archived from the original (PDF) on 4 July 2009, retrieved 22 April 2009
  8. ^ Consumer Guarantees Directive, PC Association, archived from the original on 15 May 2009, retrieved 22 April 2009
  9. ^ Valéry, Nicholas (19 May 1977). "Spare a byte for the family". New Scientist. pp. 405–406. Retrieved 25 January 2015.
  10. ^ "US vs UK - why do digital products and services cost us more". 7 June 2013.
  11. ^ Thomas, Peter (27 January 2007), "Opinion: Vista's UK price is unfair", PC Advisor, retrieved 22 April 2009
  12. ^ Duff, Mike (1 April 2009), "Is Britain Treasure Island?", Autocar, retrieved 22 April 2009
  13. ^ Leading Article (13 January 2008), "Rip-off Britain is back", The Sunday Times, retrieved 22 April 2009[dead link]

External links[edit]