Cross-border expansion in Europe is becoming more difficult

The very essence of the European Union is the borderless trade of goods and services. It has been built upon free movement of goods, services, capital, and labour between EU-countries. This objective is also what lies at a Digital Single Market. This concept has become more important than ever because of the continued upward trend in e-commerce. However, over half of online European businesses believe that international expansion within other EU-member countries is becoming more difficult, according to Stripe.

Trade friction

Stripe explains that instilling and harmonizing regulation, standards, and taxation across 27 countries, with different histories and customs, is easier in principle than in practice. In addition, trade friction remains a reality between the EU-nations today.

Diversity of rules is challenging

Stripe writes the following: “The findings were striking and unambiguous: the diversity of regulations across the EU is a significant, costly, and increasingly important challenge in the minds of online businesses”. Over a quarter of respondents said that regulation and compliance are one of their top three challenges. Furthermore, 23% said the uncertainty around changing rules (rather than the rules themselves) is a leading business challenge.

Respondents (51%) also say that selling into other EU-markets is a challenge. Unharmonized regulations and taxes are often the cause of the border which still remain in the European business map.

Regulatory and tax harmonization

E-commerce companies want regulatory and tax harmonization from the Digital Single Market. Almost two out of three business say they would be active in at least ten countries if either regulations or tax regimes were harmonized across the EU.

The desire to expand

The desire of e-commerce companies to expand is almost unanimous. Small to medium-sized businesses, with fewer than 100 employees, are in particular striving to sell in all EU-markets. However, millions of companies do not fully understand which regulations they need to adhere to. In addition, they are also scrambling around in the semi-dark to ensure that every part of their business is compliant.

Around three-quarters of businesses believe compliance is an obstacle to their growth. 30% even call this a ‘great challenge’. Most companies feel they could increase their revenue by 30% if they did not have to deal with regulations and compliance.