BREXIT – is it all Doom and Dloom for UK-based Business?
Referendum Day – 23rd June 2016 – was D-Day for many City pundits who declared that leaving the EU would result in an economic catastrophe. But now, almost five months on, we’re noticing more and more evidence that, although Brexit may be challenging for some UK firms, it could actually present new, exciting opportunities for UK-based exporters.
The fall of the Pound – who wins?
Since June, the Pound has fallen over 14% against the Euro to €1.14. Although this is bad news for holidaymakers and foreign workers, it’s a win for UK exporters. According to the CBI, there has been a “rise in October manufacturing orders from foreign customers.” The organisation’s chief economist, Rain Newton-Smith, said that figures showed that UK manufacturers are “optimistic about export prospects and export orders are growing.”
Geoffrey de Mowbray, joint chairman at British Exporters’ Association (BExA), agreed that the falling in Sterling has helped to buoy UK exports. “There are many risks associated with Brexit for exporters, not least uncertainty around documentation going forward, but the opportunities are immense, particularly with existing trading partners outside of the EU and others, such as the Commonwealth.”
Economic growth – still positive
Official statistics from the Department of Trade in October have revealed that the UK economy, contrary to popular belief, has actually grown by 0.5pc since the Brexit vote. This shatters earlier claims from the Treasury that a leave vote would result in a 0.1pc drop, leading to a recession.
In a bullish stance, Chancellor Philip Hammond claimed that: “We are moving into a period of negotiations with the EU and we are determined to get the very best deal for households and businesses,” he added.
Exports on the rise
We are a nation of traders. According to the IMF World Economic database, exports account for 17.3% of total UK trade.
A total of 22.5% of UK exported goods are sold to Asia, while America buys around 16.1% of total UK trade and we send 2.6% to Africa. Trade within the Eurozone is some 53.6%.
So, will sort of impact will Brexit have?
According to Peter Spencer, Economic Adviser to the EY ITEM Forecasting Club, “The UK is uniquely placed in exporting services and enjoys a reputation for high value added pharmaceuticals, designer-label and branded consumer products. As high growth emerging markets move away from investment towards consumption, UK exporters need to focus their energies on seizing the benefits that this switch creates.”
Rolls Royce is one firm, along with Bentley who will benefit from Brexit as much of its stock is sold to the US. A RR spokesman said that “two-thirds of our revenue and three-quarters of our order book is generated outside the EU, so the UK’s decision to leave the EU will have no immediate impact on our day-to-day business.”
Chemical and pharmaceutical companies based in Britain including AstraZeneca, GlaxoSmithKline and BTG, have all seen profits rise post-Brexit since the majority of their revenues are created from outside the domestic market. It is the UK’s largest manufacturing export sector worth £24.7bn (chemical) and £20.7bn (Pharma).
Manufacturing makes up 54% of UK exports and employs 2.6 million people. Industry leaders such as British Aerospace have a turnover of £29bn of which 90% comes from exports.
The UK car industry is another major exporter with British Automotive producing £34bn worth of annual exports, according to SMMT (Society of Motor Manufacturers and Traders).
The British art market also stands to benefit from Brexit. It has a 21% share of the global art market, after the US and China, but has seen sales fall due to EU regulations and levies that make the UK less competitive against art markets outside of the EU – namely New York, Hong Kong and Switzerland.
Trade deals with the US – a promising future
In June this year, the now US President-elect Donald Trump said that the UK will “always be at the front of the line” when it comes to negotiating free trade deals and has expressed a preference for simpler trading. Trump is a staunch supporter of Brexit and good friends with ex-UKIP leader Nigel Farage. Last month, Trump’s trade advisor Dan DiMicco told the BBC in an interview that a new trade deal with the UK would be “one of the first things” his trade officials would be organising should Trump win the election.
There’s never been a better time to export
If you’re considering moving outside the domestic market and exporting to Europe and beyond, there several essential factors to consider on conducting international trade.
– Be prepared: calculate risk versus cost and be aware of timescale. Overseas operations take years to set up and not always immediately profitable. How will this fit with your current business markets? Identify the right market and network with trade teams based in consulates and business groups already established.
– Visit your target market: obviously this is the first step – and essential to create contacts and establish risk. The Foreign and Commonwealth Office has expert assistance to businesses of all sizes aiming to export outside and inside of the EU.
– Get your paperwork in order: contact the Intellectual Property Office on security for your copyright, designs, patents and trademarks. Clear accounts are also a priority – get advice from VAT and tax experts and make sure you keep all your paperwork.
Even if you were wrong-footed by the Referendum result, it still pays to use the next two years until the agreement is ratified to plan well ahead. Cash is king. So keep your reserves healthy and minimise debt. You’ll need to stand out in what will probably become an even more competitive market. As with other industries, consider pitching to new territories. As trade links are forged outside of the EU this will create a host of new opportunities. Are you ready to grab them?
So, whether you need advice on a localisation strategy, are looking for conference and telephone interpreting services or are simply keen to get your website and legal documents translated so you can start taking the first steps towards engaging with international markets, we’d be more than happy to help you every step of the way. Contact us to see how we can help.