The UK’s trade deficit with China has more than trebled over the last year.
Data from the Department for International Trade shows that the UK imported £40.5bn more from China than it exported to the country up to June 2021 – a 240% rise in just 12 months.
The surge has been caused by UK exports to the nation dropping 34%, whilst locked-down UK consumers spent big with imports from China surging 38%.
The latest data has prompted fears that the UK is becoming too heavily dependent on Chinese goods, whilst ongoing concerns over human rights could see the government follow the US in banning certain goods where forced labour may have been involved.
Liberal Democrat spokesperson on international trade, Lord Purvis, commented that: “It’s become apparent that the government is taking us on a very worrying journey of becoming heavily dependent on China for trade in goods, and moving away from our nearest market in Europe.”
Read more: UK Brexit losses dwarf new trade deal gains
However, the China British Business Council has said that the last 10 years have been a success for British businesses exporting into China – exports of which have more than tripled to £30bn, making China the UK’s third-largest trading partner.
Analysis commissioned by The Independent has discovered that the combined benefit of all the new trade deals signed in the wake of Brexit ‘barely scratch the surface’ compared to the economic damage caused by leaving the EU.
The boost from new deals, notably those with Australia and New Zealand, amounts to just 0.01-0.02 of GDP – or less than 50p per person.
However, data from the Office for Budget Responsibility shows that the damage caused by leaving the single market is worth more than £1,250 per person.
The Independent reports that the majority of new FTAs signed by the UK government, including those with Singapore and South Korea, are merely replacing treaties that the UK had already previously enjoyed as a member state.
However, a spokesperson from the Department for International Trade commented on the new report that: “Our Global Trade Outlook – published in September – shows the centre of gravity on global trade is moving away from Europe and towards fast-growing markets in Asia-Pacific.
“Our strategy is latching the UK economy to these markets of tomorrow, and seizing the huge economic opportunities as an agile, independent trading nation.”
Read more: UK exporters coping with new rules but wary of future changes
However, academics from the UK Trade Policy Observatory noted that any new trade deals the UK signs would never conceivably cover the economic losses of Brexit.
They noted that: “Non-EU partners account for about half of UK total trade and so, to counteract the OBR’s 4 per cent loss from Brexit, would require agreements with each and every one of them to induce trade changes that create a 4 per cent increment to UK GDP. That is nowhere in sight in the numbers in the table.
“The sad answer is that the government is happy to accept, on our behalf, the economic losses from Brexit in return for political benefits (sovereignty), and trade agreements with other countries are merely making the best of a bad job from an economic perspective.”
One of the biggest changes for UK firms trading with the EU since Brexit has been Rules of Origin.
In order for firms to claim zero duty, they must be able to prove that goods are predominantly of UK or EU origin. These are complex rules, and something that we created a detailed guide and workbook to help businesses understand what these rules are.
Earlier this month we joined Enterprise Nation for a Lunch + Learn event all about rules of origin and how new rules are about to bite as we head into 2022 and discussed in detail the requirements and how you can probe the origin of your products.
Watch the event in full on the Enterprise Nation website here.
A new poll has found that UK firms are starting to get to grips with new rules since Brexit, but are wary of potential additional changes to come.
Conducted by the Institute of Export & International Trade, the poll found that 70% of respondents are confident trading with the EU, albeit only 10% said they were ‘very confident’.
The proactivity of local firms has also been shown with almost two-thirds of businesses saying they’ve arranged additional training to adjust to the new post-Brexit rules and processes, with half of that support being from outside specialists such as a customs consultant, whilst two in 10 firms have also hired additional staff.
Whilst a brighter business outlook than some may have thought, there is nervousness about what trading with the EU will look like when new import measures come into effect starting on 1st January next year.
Half of those quizzed said they are not confident that trade between the EU and UK will be trouble-free when customs declaration rules change, with just 5% saying they are highly confident that there won’t be any disruption.
Director general of the IOR&IT, Marco Forgione, commented on the poll findings that: “The past year has been a period of adaptation for UK businesses engaging in trade with the EU. Confidence in exporting to the EU has grown over the past 12 months, as companies have undertaken more training and education.”
Read more: UK becomes smaller international trader since Brexit
He continued: “The IOE&IT has been supporting businesses through this year, delivering technical support, guidance and most importantly training, to ensure British exporters can trade both confidently and compliantly.
“As the Brexit timeline moves on, the next crucial date is 1 January 2022. The Institute stands ready to support importers implement these new changes and help them navigate them effectively.”
The UK has seen its global international trade activity fall since Brexit, despite aims to become ‘global Britain’.
Data from the Bank of England shows how trade flows, imports plus exports, as a percentage of GDP has fallen for the UK, whilst they have continued to rise for EU main countries including Germany, France and Spain.
Despite the global Britain rhetoric, the UK has become a *smaller* international trader since Brexit.
— Ben Chu (@BenChu_) December 8, 2021
Chart shows trade flows as share of GDP – it's holding up for main EU countries, but has declined sharply for UK in recent years 👇https://t.co/51RGZOO2MQ pic.twitter.com/FpT1epRb0b
The data was released as part of the Bank of England’s recent speech by Michael Saunders reporting on the outlook for inflation and monetary policy.
In a wide-ranging speech, Saunders noted how the UK economy has become less globalised ‘with effects from the pandemic exacerbated by Brexit’.
Read more: Webinar exploring the export potential of Switzerland
For example, trade flows compared to 2019 have fallen by more than any other G7 country, whilst Q3 trade flows this year has a share of GDP were the lowest for 12 years.
The UK labour market has also become less global with the number of EU nationals working in the UK dropped markedly, contributing to worker shortages in haulage, farming and care industries to name a few.
This month we partnered with Prodigo to deliver a specialist webinar exploring the export potential of Switzerland.
Often overlooked as a viable opportunity, the webinar examines the current business dynamics in the country, current trade relations with the UK, opportunities for British companies and how to approach potential Swiss partners.
Watch the webinar in full below:
If you’re looking to expand export activity into more EU nations, a good place to start is by making sure you’re up to speed with post-Brexit customs declarations, licenses, VAT on import and rules of origin.
Find out more in our free post-Brexit planning checklist here.
Earlier this month we joined Deloitte on a panel discussion with Enterprise Nation.
Part of Enterprise Nation’s new international trade hub, the panel discussed what’s changed for businesses in the 10 months since the end of the Brexit transition period, what support SMEs need in particular and what’s to come in 2022.
Learn more about the international trade hub and listen in to the panel discussion here.
Swiss parliamentarians look set to unilaterally remove import duties on almost all industrial goods in a move that could come into force as early as January next year.
In a move designed to simplify Swiss customs tariffs for traders, the decision also aims to help reduce the high price of goods for consumers.
The policy is subject to a final vote but looks likely to pass, resulting in the Swiss tariff code downsizing from 6,172 tariff lines to 4,592.
Opportunity for UK firms
Trade between the UK and Switzerland is currently worth just under £31bn a year with a £5.8bn trade surplus in favour of the UK, making it the UK’s 10th largest trading partner.
The Swiss market is a surprisingly large opportunity for UK businesses, and it’s something that Go Exporting in partnership with Prodigo are going to outline in an upcoming webinar discussing key market sectors and how to do business in the country.
This one-day online training event is designed to explain the importance of applying and following international rules surrounding VAT. The crossing of goods and services across international borders is a vital part of the global economy, and even the smallest of mistakes and errors can cause expensive delays and other issues in the supply chain.
The course has a focus on the effect of Brexit on the rules surrounding UK VAT and International Trade, covering the effects on both goods and services. The course will cover:
- Import VAT and applying postponed VAT accounting to goods
- Import One Stop Shop (IOSS)
- Evidence requirements and zero rating for goods
- The general rules and exceptions to those rules for the sale of services
- Determining the place of supply and when to apply the reverse charge
Correctly submitting your VAT return as an organisation is vital. Not only can it save your business money, but it can also lead to legal trouble if you don’t do so correctly. Maximising what you can claim in terms of VAT, and reducing any possible delays with regard to processing your claims is an essential part of running an efficient business.
Important concepts covered in this course include:
- Exporting and importing goods – Zero rate, evidence of place and time of supply, import VAT and postponed VAT accounting, relief schemes and duty deferment accounts
- General place of supply rules – From a B2B and B2C perspective, exceptions to the rules of land, digital supplies, events and admission, and the reverse charge
- Selling goods to private individuals and the IOSS
- Completing your VAT return
Have you explored the export potential of Switzerland? You may be surprised by the size of the opportunity.
In this upcoming free webinar, we will hear from our Swiss partner Prodigo about the key market sectors and how to do business in the country. Don’t miss this opportunity to explore the potential opportunities in this beautiful country.
