A no-deal Brexit could unleash a flood of fake goods in the UK, retail expert says

There could be an “explosion” in goods sold via the grey market in the event of a no-deal Brexit, according to a British retail expert. The term “grey market” refers to legitimate products sold via unauthorized — though legal — sellers, while a “black market” is when scarce products are traded illegally, or when goods are counterfeited.

Michelle Whelan, chief executive of retail marketing agency Geometry U.K., told CNBC that if Britain exits the EU without a deal, the price of some legitimate products may rise by more than 10% due to scarcity. Unauthorized resellers that may have previously bought overstocked or out of season items in bulk may be able to undercut prices, especially online.

“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,” she told CNBC by email. “A no-deal Brexit and explosion of grey market websites via unauthorized dealer networks could continue to give us access to products we want at cheaper prices. With a deep enough search, all of us can find grey market websites catering for products such as shoes, watches, clothes, cameras, furniture, TVs, and more,” she added.

Businesses prefer to sell their goods through authorized sellers or under licensing deals because it gives them more control over how items are presented and priced, but if products are sold on the grey market, via unauthorized (though legal) channels, they may be sold at a discount. Product scarcity also risks an increase in counterfeit goods traded on the black market if a Brexit deal is not signed, Whelan said, but this could be countered by official sales channels using new technology.

“With the risk of an insurgence of ‘fake’ products through grey or black markets, retailers in the UK could adopt a similar strategy to Alibaba’s Tmall, which uses blockchain to guarantee product quality, ” she said. Tmall uses the blockchain to trace the origins of imported luxury goods to make sure fake products do not appear for sale. It collects together manufacturing and supply chain information to give goods an individual code so customers can see where their purchases have come from.