If you didn't use Simple Delivery, and you are being asked to deal with this case, then you should refund the buyer.
If you used SD, Ebay will email you to say you don't need to do anything. Otherwise, refund within the timescale in the case.
If you wait and let Ebay step in and refund, you get a defect on your account for a case closed without seller resolution.
You can then make a claim via Packlink or Royal Mail for the cost of the item and the postage, although I believe you have to wait until 10 days after expected delivery for a Royal Mail claim.
"There are two ways to be fooled. One is to believe what isn't true; the other is to refuse to believe what is true.”
Søren Kierkegaard, Danish philosopher (1813 - 1855)