Small parcels shipped from China to the UK that aren't subject to import taxes more than doubled in value last year, as British businesses complain of unfair competition.

These small packages rose in value from £1.3bn in 2023-24 to around £3bn in the latest financial year, exclusive data obtained by the BBC shows.

Chinese e-commerce giants such as Shein and Temu are thought to be drivers of this increase as sales of cheap goods to online shoppers in the UK continue to rise.

The UK government is reviewing the rules on so-called low-value imports, but industry groups want swifter action to protect retailers from being undercut, and consumers from potentially faulty goods.

Low-value imports, which are worth £135 or less, are currently exempt from customs duties.

The £3bn worth of these parcels from China made up 51% of all the small parcels shipped to the UK from around the world last year.

That was up from 35% in 2023-24, according to HM Revenue & Customs (HMRC) figures obtained by the BBC via a Freedom of Information request.

Katerina Buchy, director of Sheffield-based giftware wholesaler Ancient Wisdom, said low-value imports were hitting her company's business because it couldn't compete with the prices on sites like Shein and Temu.

"It's affecting our customers as well. They're not ordering from us because they know their customers can get it cheaper online," said Ms Buchy, who has worked at the firm since 2004.

"I think the government should not allow these companies to export such high quantities of products under these rules because it's just ridiculous.

"I'd like to know how much they are losing in taxes. We pay taxes. We employ more than 100 people."

Temu and Shein have become popular among UK consumers in recent years for selling affordable items, including clothes, homeware, electronics and toys.

Founded in China but now headquartered in Singapore, Shein recorded soaring profits last year.

It has tried to get itself on the New York and London stock exchanges, but has yet to secure a listing on either.

Both companies were questioned by MPs earlier this year over labour standards linked to the making of products sold on their platforms.

Natalie Berg, retail analyst at NBK Retail, said it was no surprise that the increase in the value of small parcels from China had coincided with the expansion of companies like Shein and Temu.

"They've gone from niche newcomers to retail powerhouses in a very short period of time," she said.

But she warned that the removal of the tax exemption could disproportionately hit lower-income consumers and small firms who use it to import goods.

She added: "This is a loophole that needs to be plugged, but the government must ensure that any changes don't ultimately harm consumers or small businesses."

'Significant and growing threat'

The Treasury announced a review of low-value imports in April following lobbying from major retailers, including Next and Sainsbury's, which argued the exemption enabled overseas companies to undercut them.

But the British Retail Consortium (BRC) has called on ministers to take action now.

Andrew Opie, the BRC's director of food and sustainability, said low-value imports posed "a significant and growing threat" to investment in UK High Streets as retailers faced unfair competition.

He added that they also exposed consumers to "unregulated, potentially unsafe products" because they did not go through the same customs check process as other goods.

A spokesperson for Temu said the company aimed to have at least half of the sellers using its UK platform based in the country by the end of the year.

"This approach helps consumers access affordable products while giving UK businesses a low-cost channel to reach new customers and grow," the spokesperson said.

A spokesperson for Shein said the firm's "on-demand" business model allowed it to make savings that it could pass on to its customers.

They added: "Vendors are required to comply with Shein's code of conduct and stringent safety standards."

Treasury review ongoing

The US has already ended its so-called "de minimis" exemption on imports of low-cost goods from China, but the policy will now be applied to the rest of the world from Friday.

The previous rule had allowed goods valued at $800 (£596) or less to enter the country without paying any tariffs.

The European Union also recently announced plans to charge a €2 flat fee on small packages worth €150 (£129) or less entering the bloc.

While the value of small parcels arriving in the UK from China has soared, when it comes to the actual number of items entering the country, the picture is less clear.

HMRC said it only records the number of customs declarations used for goods worth £135 or less, and multiple items can be included under one declaration.

It recorded around 281,000 customs declarations for low-value imports dispatched from China in 2024-25 – about 12% of the total.

A Treasury spokesperson said Chancellor Rachel Reeves' review of the customs treatment of low-value imports was ongoing and would be published "in due course".

They added: "We are a pro-business government that is backing Britain's High Streets by protecting and extending business rates relief that would have ended without our action, permanently lowering rates for retailers from next year, and capping corporation tax at the lowest level in the G7 to encourage investment and growth."