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UK service exports reach record levels

New data from the Office for National Statistics has found UK service exports have grown to their highest-ever levels. 

Sales grew by 20% compared to 2021 – and up 23% against 2018 – to £400 billion last year. 

The UK sits behind only the US as the biggest services exporter globally with the sector contributing some 80% to the UK’s total GDP. 

Business and Trade Secretary Kemi Badenoch said of the latest figures that: “These new figures are a trade success story and cement the UK’s position as a global services superpower.

“Services are the lifeblood of our economy, employing over 8 in 10 of our workforce. To see services trade reaching these heights is a firm reminder of the resilience of our strong services economy and shows significant progress in our race to export over a trillion pounds of British goods and services a year by 2030.

“I’ll be using my talks with Mexican politicians and UK businesses operating in Mexico to make the case for a revamped UK-Mexico trade deal which will significantly increase export opportunities, and boost jobs around the UK.”

Read more: New Northern Ireland Protocol could unlock US trade deal

The new Windsor Framework agreed between UK Prime Minister Rishi Sunak and President of the European Commission Ursula von der Leyen could open even more avenues for UK firms to prosper. 

The new policy for managing trade between the UK and NI, and then NI to the EU, could unlock negotiations with the US over a mega trade deal. Meanwhile, threats to the Good Friday Agreement had put the brakes on the UK’s efforts to join the CPTPP trading bloc, something which now looks more likely.

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UK food and drink exports exceed pre-pandemic levels

The global appetite for UK food and drink has continued to grow despite pandemic and post-Brexit pressures. 

New data from the Food and Drink Federation (FDF) has shown how food and drink exports have now surged past pre-pandemic levels to stand at a record £24.8bn with chocolate and cheese exports proving ever-popular. 

Over half of all food and drink exports went to Europe where sales actually rose 22% to £13.7bn. New emerging partners like Vietnam have also seen double demand, whilst sales to non-EU countries broke the £10bn value barrier for the first time. 

And high demand has been seen across almost all categories, highlighting a general trend towards UK produce – and not just high-demand brands. 

Dominic Goudie of the FDF commented: “UK food and drink continues to be recognised around the globe for its high quality, safety, and sustainability credentials, with demand as strong as ever across the EU and at record levels in developing markets.

“As the UK’s largest manufacturing sector, dynamic trade is vital if our sector is to deliver the robust growth we’d like it to in the coming months and years, benefitting communities in every part of the UK.”

Read more: Free Webinar: Exporting to Ireland

“Imports are essential for the success of our sector, adding value to UK produce while ensuring consistent availability and value for shoppers.

“There also remain substantial opportunities to deliver further export growth, but this will require the government to use all the trade policy levers at its disposal in support of the food and drink sector, to ensure that our producers can access competitively priced ingredients and sell into the fastest-growing markets.”

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New Northern Ireland framework could unlock US trade deal

UK Prime Minister Rishi Sunak and President of the European Commission Ursula von der Leyen displayed what has become an increasingly uncommon showing of UK/EU cooperation and agreement late last month with the announcement of the breakthrough Windsor Framework. 

The new deal for Northern Ireland fixes many of the problems that the previous protocol had thrown up for both businesses and individuals. 

If agreed upon and enacted into law, some of the key takeaways for UK firms include:

  • Green and red lanes for trade, with green lane goods destined for NI requiring significantly fewer checks and less paperwork, whilst red lane goods at risk of moving into the EU requiring normal checks
  • New data sharing and labelling arrangements (TBC)
  • Goods moving from NI to GB will not require export declarations
  • Specific GB products like potato seeds and sausages will once again be sold in NI
  • Updated rules on pets, parcels and medicines too

Breakthrough could reignite US trade deal talks

Both Trump and Biden have been outspoken in their ‘disappointment’ at the state in which Northern Ireland was left as a result of the old protocol… and that disappointment actively put a blocker on talks towards a mega trade deal between the two nations. 

The announcement of the Windsor Framework was greeted warmly by the current President who noted its importance in upholding the Good Friday Agreement. 

A White House source then hinted towards wider benefits, noting that: “We believe that this will help improve the prosperity of both the EU and the UK, and will open up all kinds of new avenues for trade that were somewhat at risk.”

Download now: Post-Brexit planning checklist 

The government had been hoping for a swift trade deal to be agreed upon with its largest ally in the wake of the Brexit vote and has since opted instead to pursue economic arrangements with individual States. 

New developments could mean a more comprehensive agreement is back on the table, whilst talks for the UK to gain access to the CPTPP could also be reignited. 

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Brexit deal scuppering SME growth plans

The Trade and Co-operation Agreement (TCA) between the UK and EU in the wake of Brexit is delivering more headaches than benefits for the majority of exporting SMEs. 

That’s according to data collected in December last year by the British Chambers of Commerce from almost 1,200 surveyed businesses. 

The survey found that almost eight in 10 firms had found the Brexit deal was not helpful in their drive to increase sales or grow their business overall, whilst more than half continue to face difficulties adapting to the new rules for trading goods. 

Download now: 7 key changes to UK-EU trade post-Brexit

Meanwhile, 45% of service businesses said they’re still trying to adapt, whilst over four in 10 said they’re finding it difficult to obtain visas for new staff. 

These difficulties are directly translating into business performance too. 

The survey also found that 80% of firms are seeing the cost of importing increase, whilst more than half have seen their margins cut. Three-quarters of manufacturers also said they’d had issues with shortages too. 

One manufacturer commented on their experience that: “Brexit has been the biggest ever imposition of bureaucracy on business. 

“Simple importing of parts to fix broken machines or raw materials from the EU have become a major time-consuming nightmare for small businesses, and Brexit-related logistics delays are a massive cost when machines are stood waiting for parts. We used to export lesser amounts to the EU, but the bureaucracy makes it no longer worthwhile.”

To help alleviate some of the issues UK businesses are facing, the British Chamber suggested five fixes that the government should look to introduce:

  • Create a  supplementary deal with the EU that either eliminates or reduces the complexity of exporting food for SMEs.        
  • Establish a supplementary deal, like Norway’s, that exempts smaller firms from the requirement to have a fiscal representative for VAT in the EU 
  • Allow CE-marked goods and components to continue to be used in Great Britain after 2024. 
  • Make side deals with the EU and member states to allow UK firms to travel for longer and work in Europe. 
  • Reach an agreement on the future of the Protocol on Ireland/Northern Ireland with      the European Commission in the early months of 2023, to stabilise our trading relationship.

If your business is suffering as a result of Brexit, combined with current global economic headwinds, then Go Exporting can help. 

Our international trade consultancy helps businesses of all sizes to expand into new markets, from research and strategy to full export implementation and sales generation. 

Learn more about how we can support your company here.   

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Economic headwinds hampering growth for SME exporters

New data has highlighted how a range of global economic factors are hampering growth efforts for small and medium-sized exporters. 

Data from more than 2,300 UK SMEs as part of the British Chamber of Commerce’s quarterly Trade Confidence Outlook for Q4 found that just one in four had seen international sales growth at the backend of 2022, with a further 47% saying sales had stagnated if not fallen. 

The picture for 2023 looks equally stagnant too with 28% expecting a sales slump against 24% saying they could see an increase in demand. 

Total revenues are expected to rise though as cost pressures and shrinking margins mean 64% of respondents are planning to increase pricing over the coming months. 

Difficult business environment

Consumers and businesses alike have struggled in the post-pandemic era to really kick on once more with the cost of living, inflation and economic headwinds driven by the war in Ukraine contributing to a trading environment some are finding more difficult than during the lockdowns. 

Additional factors such as Brexit have made it tougher, and more expensive, for UK firms in particular to access the EU market. 

Respondents to the BCC survey noted that energy (72%), labour (67%) and raw materials (61%) were the biggest cost pressures being faced – three critical areas that it’s hard to mitigate against. 

Head of policy at the Chamber, Willian Bain, said of the survey results that: “Last autumn the World Trade Organisation forecast global trade growth of just 1% in 2023, down from 3% in 2022. This is creating huge headwinds for smaller UK firms battered by the pandemic, Brexit and energy price shocks. 

“Against this background, it could be some time before the global shipping and trading systems return to anything approaching normality. 

“The UK government cannot afford to sit idly by as we head into such uncertain trading conditions. It must throw a lifeline to our struggling exporters who are desperately trying to keep their heads above water.”

Download now: 7 key changes to UK-EU trade post-Brexit

Bain continued: “Outside of the EU, the US is our biggest trading partner, and the one that BCC members are most interested in, yet progress on free trade talks are stalled. As the Good Friday Agreement anniversary looms the UK has a golden opportunity to transform our trading relationship with our two biggest export markets in one fell swoop. 

“Other measures Government should consider include providing effective end-to-end trade finance and setting up a trade accelerator – by working alongside our global network to help firms enter new markets and maximise sales.” 

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Sell in Spain? There’s a new plastic packaging tax you need to know about

Global efforts to reduce our impact on the planet are gathering pace, and countries within the EU are leading the way when it comes to pushing reforms on product packaging.

The next step in this drive has come into force in Spain in the form of a plastic packaging tax – an indirect levy on the use of non-reusable plastic packaging that’s sold in the country. 

Here’s what businesses exporting into Spain need to know, and what they need to do next.

What businesses need to know

The plastic packaging tax will be applied to any single-use packaging that’s either primary, secondary or tertiary in scope. This includes packaging that is not primarily made of plastic materials, where the weight of the non-recycled plastic elements will be taxed. 

Recycled plastics are exempt from the levy, however, they must be accredited as recycled by either the National Entity of Accreditation, similar accreditation bodies associated with EU member states, or comply under UNE-EN 152343:2008 Plastics – Recycled Plastics – Plastics recycling traceability and assessment of conformity and recycled content.

What products does the tax apply to?

This tax matters because it applies to a broad swathe of the economy, from food and drink products to cosmetics and essentially, any product that has packaging! 

Some key taxable elements include:

  • Cosmetics: product applicators, bottles, containers
  • Food and drink: trays, bottles, jugs, food containers
  • Packaging: film to protect products (like magazine wrap), boxes, cases, vacuum packaging
  • Secondary packaging: plastic rungs, packaging tape, bubble wrap and pallet protective film

There are some non-taxable items, however, which revolve around essential packaging or needed for use. For example, air fresheners and packaging that’s needed to contain, support or preserve the goods either through their lifecycle or intended use. 

What you need to do next

First, businesses need to establish who is liable for the tax. 

Manufacturers are liable from the first delivery or making the product available within Spain, with the amount of tax paid detailed in invoices to their customers. 

Importers become liable when the import duties are accrued in accordance with customs legislation. 

Critically, taxpayers not established in Span will need to appoint a natural or legal person to represent them before the tax administration – before they start activities that would be taxable. 

This is a complex piece of legislation and it’s important for exporters or anyone doing business within the Spanish territories to understand, factor into pricing, and properly declare. 

For more information, Go Exporting can help with the tax calculation and implications for your business. Get in touch with us here

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WTO predictions for 2023

The global economy has massively shifted since the COVID-19 pandemic. It has yet to recover, and it looks as though a full recovery won’t happen anytime soon, especially with the effects of the war between Russia and Ukraine. Many countries are experiencing financial crises because of this.

The WTO Director-General Ngozi Okonjo-Iweala has stated that the economy is in crisis and that 2023 looks “much bleaker.” As the war in Ukraine continues, disturbances to global trade look set to continue for a long time to come.

Conflict in Europe has seriously affected the global economy and international trade. Its main effect is the increase in the cost of doing business – as well as driving global inflation. It means trade growth has gone up in value – with an increase to $7.7 trillion during the first quarter of 2022 (according to the United Nations Conference on Trade and Development) – however, demand has slowed due to the rising prices.

Growth in trade volume

According to the WTO report, the cost of trading dramatically rose in the first quarter of 2022, particularly in the energy sector. After the war began in Ukraine, fuel prices have soared, making trade energy prices far more expensive around the globe.

The WTO also reported that 2023 would see slower economic growth due to inflation, debt sustainability, and soaring interest rates. There are also issues with supply chains and regionalisation, which have had a significant impact on global prices, contributing to this crisis. The WTO even said there might be a fall from 2.4 to 3% for world trade growth.

Everyone, including families and businesses, will feel these economic difficulties, as it makes energy and food prices much higher than before.

WTO predictions for 2023

The WTO predicts that there will have been an increase of 3.5% in the volume of world trade in 2022 (in comparison to 2021). As well as that, they predict that 2023 will only see 1% of economic growth rather than the previously expected 3.4%. This change occurred due to the enormous, ongoing rise of energy and food worldwide.

This predicted decline would affect economies worldwide, particularly in Europe, the US, and China. Europe will experience higher and higher energy prices, significantly impacting households and businesses. In the United States, it is expected that capital investment and the housing market will be affected. In addition, with China still trying to manage outbreaks of COVID, they will see a continuation of production disruptions.

In developing countries, there may also be issues with debt and food shortages.

What can businesses do about it?

This stunt in economic growth will affect everyone – particularly those looking to do business overseas as international trading is more expensive than ever. At Go Exporting, we support businesses of all sizes to grow into new international markets to either maintain sales or grow profits. Learn more about how we help organisations just like yours to open a world of opportunities through our international trade consultancy services here.

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Lower appetite for British food and drink in EU

Since officially leaving the EU, the UK has seen exports reduce by a quarter, with a total of £2.4 billion in lost sales. Certain countries have seen more of a dip than others. For example, Spain, Germany, and Italy’s imports from Britain are down by 50.6%, 44.5%, and 43.3%, respectively. Even Ireland has seen a significant decline, which is particularly worrying, as it was Britain’s largest country for food exporting.

All of this means a severe impact on Britain’s economy, something which recent data from the ONS has highlighted in stark reality.

Brexit’s impact on food and beverage exports

With Britain no longer working under the EU’s trading policies, trade isn’t as simple. With more barriers in place, there are increased costs, meaning countries in the EU aren’t as willing to import.

The TCA – the EU-UK Trade and Cooperation – was a free trade agreement signed on 30th December 2020, which became into effect on 1st January 2021. This agreement saw the tightening of rules and detailed all the customs requirements and restrictions.

This has particularly affected the food and drink sectors with more red tape increasing costs and causing delays at ports.

Brexit is not entirely at fault, though – the COVID pandemic has also had a significant impact on food and drink exports too.

OBR on the post-Brexit economy

The TCA changed everything in terms of trading between Britain and the EU. Before, it was almost entirely free trade; now, different policies are leading to a reduction in activity. While there was a notable rise in food and drink exports to non-EU countries (11%), that growth did not make up for the loss of trade into the EU.

The OBR stated that Brexit equalled a reduction of 4% of the UK’s potential GPD, which is significant. It also said that the pandemic has had a severe impact and could further that by another 2%.

“The OBR observed that the UK’s goods trade with the rest of the world experienced similarly sharp falls at the start of the pandemic.”

These observations indicate that UK businesses are struggling with exporting, trading, and overall economic growth. It’s affecting everyone, but if you’re a trader, you are likely to be looking for a solution. You can still grow internationally by thinking strategically, adapting your methods, and finding new markets.

Create an export strategy with Go Exporting

Whilst Brexit has hampered trade with the EU, there are opportunities for UK firms to grow through Brexit growing pains by looking further afield. 

Our international trade consultancy can help identify new markets to grow into. We have an expert team ready to answer your questions, so don’t hesitate to get in touch.

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Free Webinar: Exporting to Ireland

At the start of the year, Go Exporting CEO Mike Wilson joined Business Wales to host a webinar on exporting to Ireland.

The webinar looked in detail at the opportunities for businesses in the Irish market, with information on the economy, key sectors and how to do business.

Watch in full below:

If your business is new to exporting or want some extra information on the steps involved, access our free Expert Exporter resource hub here.

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Win a free ticket to the biggest start-up show of 2023!

The StartUp Show from Enterprise Nation is rolling into King’s College London this month as SME founders can engage with over 100 speakers, a range of advisors and 2,000 other community members. 

Go Exporting CEO Mike Wilson will be offering advice and answering questions too, and to celebrate our involvement, we have two free tickets to giveaway! 

Watch the video below to see what the event, which takes place on 28th January, is all about:

We’re giving away two free tickets to one lucky winner which we’ll pick at random and contact by email on Friday 20th January.

To enter, leave your details using the form below. 

Good luck!

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