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UK exports outside the EU growing five times faster

Data from the Office for National Statistics have shown how UK firms have been capitalising on opportunities outside of the European Union over the last 18 months. 

The figures show that in the year to September 2019, EU exports grew by 1.3% to just under £300 billion. Non-EU exports, however, grew 6.3% to £373.7 billion – including 60% of service-sector exports such as finance, travel and transport. 

The ONS data also showed a further quarterly increase in exports, reaching a record high in Q3 last year. The trade deficit of goods also fell to £29.2 billion from £34.7 billion between Q2 and Q3 with increased exports helping shrink the gap. 

Liz Truss, Internationa Trade Secretary, commented on the figures that: “These figures show how big the opportunities are for British businesses exporting across the world, and the strength of the trade relationship with the USA and Japan.

“This government will continue to back our business communities to ensure they have the tools to seize this opportunity and take full advantage of all its benefits.

“My priority is to strike new trade deals with key partners and to open up new markets to British products as we go forward and leave the European Union.”

Read more: UK business confidence on the rise

The increase in worldwide trade for UK firms, or that outside of the EU bloc, is a positive movement for businesses as Brexit looms in just over two weeks. 

It indicates that companies have for the last 18 months been broadening their horizons, either as a strategic ploy to dampen any impact of whatever EU market access agreement is rolled-out – or indeed facilitating organic orders fuelled by increased global demand for British goods and services. 

Is your business looking to increase demand and sales on the global stage? Find out how Go Exporting can help introduce your businesses to new worldwide markets through our international trade consultancy services.

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UK business confidence on the rise

The confidence levels of UK businesses are slowly starting to rise after three years of political uncertainty – though investment caution remains. 

The resounding majority delivered to Boris Johnson in the general election caused a sharp increase in directors’ confidence in both their own firms and the economy at large. 

The Institue of Directors reported that confidence in the economy for December 2020 grew from negative 18% in November to positive 21%, whilst organisational confidence rose by over 20 percentage points to 46%.

Much of the new-found confidence is derived by the election promise from Johnson to take the UK out of the European Union by the end of January, bringing an end of over three years of uncertainty for businesses of all sizes – as well as costly preparations and planning. 

The service sector, in particular, saw an increase in activity at the end of 2019 with the IHS Markit/CIPS UK purchasing managers’ index for services rising 0.7 points to 50, indicating activity increases for the majority of companies. 

Read more: UK SMEs confident of achieving 2020 aims despite Brexit uncertainty

Economics associate director at IHS Markit, Tim Moore, commented to the Financial Times that: “The modest rebound in new work provides another signal that business conditions should begin to improve in the coming months, helped by a boost to business sentiment from greater Brexit clarity and a more predictable political landscape.”

With the UK’s departure from the EU just three weeks away, it’s now or never for businesses to ensure they’re prepared. If your company is yet to make concrete strategic plans to manage any disruption, including additional shipping paperwork or regulation changes, find out more about Go Exporting’s Brexit consultancy here.

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Increase in UK firms claiming Estonian e-Residency to retain EU market access

There have been numerous ways in which businesses have looked to prepare for Brexit. For some, setting up operational hubs on the continent has proved popular. Others have switched head office locations, whilst some are still resolute in their lethargy to make any operational or structural changes at all. 

But for some UK companies, a digital approach to avoiding the potential steepest of pitfalls has proved most popular – claiming an e-residency in Estonia. 

The Estonian government created e-Residency over fifteen years ago as a means for residents to communicate with the government, alongside 99% of other governmental services. And five years ago, this programme was opened up to foreigners who were already attached to Estonia to some degree – including companies who which to have a digital identity as being an EU firm. 

Managing director of the e-Residency programme, Ott Vatter, whilst speaking to readyforbrexit.co.uk, noted an increase in applications from UK businesses since the Brexit referendum result. 

Vatter said that: “We have seen a significant increase in applications for e-Residency since Brexit. e-Residency is useful for Brits because it means that they can still have a  company within the EU and still remain in the EU’s legal framework without actually physically leaving the UK space. 

“It is a virtual gateway to the EU, without being in the EU.”

For €100 you can register for e-Residency, and it costs €190 to establish a company alongside additional bookkeeping services if required. Yet whilst personal applications don’t result in becoming a physical resident or requiring to pay tax to Estonian authorities, businesses set-up using the programme it becomes a tax resident, yet tax will likely still need to be paid to UK authorities in this example if that’s where the customer base and main premises reside. 

Vatter explained that: “Before e-Residency, you could create a company in the EU by travelling to Germany or Estonia or France, for example, and pay quite an expensive fee to a lawyer and create an EU company. 

“So its conception, e-Residency is not anything new. What’s different is the fact that you can do it from the comfort of your home using your computer from anywhere in the world and when you become an e-Resident there are no obligations. It doesn’t mean that you become a tax resident or a resident of Estonia. There are no strings attached when you apply for e-Residency. It’s a personal status.

“Now, when you create a company using e-Residency then that company is automatically a tax resident of Estonia, but if your main customers are still in the UK and your permanent establishment is in the UK then you will probably have to pay your corporate tax in the UK.

“The general rule is where you create your value, there you pay your tax. It gets a bit more complicated with cross-border services and service-based industries. And, if you are travelling around a lot as a freelancer and you don’t have one permanent establishment, then we see that the benefit for them might be to pay your taxes to Estonia because you don’t have one permanent establishment.”

It takes around two months to apply to become an e-resident, whilst company registration takes around 30 minutes. 

Read more: UK SMEs confident of achieving 2020 aims despite Brexit uncertainty

But critically for UK firms, once the EU company has been established via e-Residency, that business has the right to offer goods and services across the EU and in accordance with the EU’s legal framework – even if that company is actually based in the UK and EVEN after a potential no-deal Brexit. 

So far, 3,200 UK residents have signed up for the programme – including 450 companies. 

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Global trade remains strong as international investment stutters

A new study has found that globalism is strong and well in the world of international business, despite a turbulent period of trade conflict and political separation. 

The Global Connectedness Index (GCI), published by DHL, found that international flows were smoother than feared, with the annual barometer of global goods, capital, information and people flow showing only a slight overall dip for 2018. 

However, international investment has taken a hit, in part because of US tax policy changes aiming to repatriate earnings held overseas. 

Chief executive of DHL Express, John Pearson, commented that: “While current geopolitical tensions could seriously disrupt global connectedness, this 2019 update finds that most international flows have remained surprisingly resilient so far.

“Ultimately, what we’re seeing today is the evolution of globalisation, not its decline. Decision-makers need to be careful to not overreact to strong rhetoric or headlines.”  

And on claims that trade was shifting away from globalisation towards regionalism, Steven Altman of the NYU Stern School of Business said that: “Our analysis does not confirm a robust regionalisation trend. Instead, we see that the average distance across which countries trade has held steady since 2012.”

Read more: US imports from China drop 13% in 2019 as trade war continues

“While fraying relations between major economies could lead to a fracturing along regional lines, such a shift has not yet conclusively taken place.”  

The GCI report suggests that the outlook for 2020 remains stable with just a slight decline in trade intensity forecast.

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UK SMEs confident of achieving 2020 aims despite Brexit uncertainty

The vast majority of small business owners say they’re confident of achieving their company goals in 2020 according to a new study. 

The research, carried out by Vistaprint, quizzed 500 SME bosses on their primary goals for next year and their optimism for being able to achieve them. 

And despite the ongoing Brexit uncertainty, the General Election and rising costs, 86% of respondents said they were confident of achieving their 2020 business goals. 

The study found that UK business owners are more likely than not to feel ‘confident’, ‘prepared’ and ‘optimistic’ about the future, with just one in five saying they felt apprehensive. 

Of the primary goals for SMEs in 2020, the most popular were:

  1. Substantially increasing revenue and growth
  2. Reaching a new customer base
  3. Surviving the year
  4. Generating return customers
  5. Breaking even
  6. Introducing new products/services
  7. Increasing social media presence
  8. Building or updating website
  9. Expanding marketing/advertising efforts
  10. Selling the business

However, despite the optimism, a quarter of firms expect a struggle in the year ahead, with half saying they’re concerned on how political changes will affect their business and 38% saying they may struggle due to bills and expenses rising. 

Customer strategy and insights director at Vistaprint, Simon Baier, commented on the findings that: “While political changes and economic barriers are very real challenges facing Britain’s small businesses, our research shows that these factors haven’t dampened the UK’s entrepreneurial spirit.”

Read more: Exporting SMEs grow twice as fast as non-exporters

“It’s encouraging to see small business owners’ confidence and optimism going into 2020.

“The better they do, the more chance they have of generating jobs for local people, giving an economic boost to their community and continuing to provide significant value to customers.”

Perhaps the most pleasing statistic of the study, however, is that 90% of SME owners said they were pleased they took the initiative to start their own firm. 

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Exporting SMEs grow twice as fast as non-exporters

New research has uncovered small and medium-sized businesses trading internationally have grown at almost twice the rate as small firms selling within local markets. 

The study, carried out by the government’s export credit agency, UK Export Finance, found that firms trading domestically experienced an 8.4% growth rate over the last five years, compared to 15.2% for those exporting internationally. 

The survey, which quizzed 1,000 UK SME’s, also uncovered that almost half of those exporting businesses said trading internationally increased profits by up to 20%, whilst for 9% of firms, exporting increased profits by over the 20% mark. 

Despite the opportunity to expand into new, less saturated markets, as well as improving bottom-line results, 19% of SMEs say they believe they’re ready to export but choose not to do so, citing challenges over managing export procedures, paperwork and also finance issues due to delayed payments. 

Secretary of State for International Trade, Liz Truss, commented that: “Finance is a key barrier coming between SMEs and their export potential. If small businesses were to export more, Britain would see even more stronger economic growth.

“In its centenary year, UKEF continues to enable companies from across the UK to expand their global reach by helping them succeed abroad. That’s why it is at the heart of my plan to get businesses ready to trade as we leave the EU.”

Despite this, the opportunities for SME exporters are evident, with research finding that businesses with fewer than 50 employees have seen the fastest revenue growth through exports, and higher average growth annually (10.9%) compared to non-exporting firms (7.4%). 

Opening a world of opportunities

Despite strong global trade headwinds, ongoing trade wars between the US and China and the little matter of Brexit, exporting has been a success story for British businesses over the last four years. In the 12 months to May 2019, overall exports grew by 4% to surpass £647 billion – the highest levels on record – whilst the number of exporting manufacturers also grew to their highest levels in over a decade. 

Read more: Global pressures having little impact on UK export growth as trade reaches new record high

If your business is considering broadening its horizons and looking to expand into the international marketplace, conducting thorough market research and analysis, devising an entry strategy and understanding how to mitigate the challenges that international trade can arise are critical to ensure early-years success. 

Find out how Go Exporting’s international trade services can help your company make a success of exporting and open a world of opportunities here

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US imports from China drop 13% in 2019 as trade war continues

The ongoing trade war between the USA and China has seen imports into the US from China drop by 13% so far in 2019. 

Tariffs were the primary cause of the decline on imports from China, with Vietnam proving to be the biggest benefactor with exports to the States increasing nearly 35%, primarily in the sales of computers, telephone equipment and other machinery. 

Despite proving to be the biggest benefactor of the US / China trade war, Vietnam is actually struggling to cope with the demand and number of inquiries due to a lack of skilled labour. 

Associate director at IHS Markit who released the trade report, Michael Ryan, commented that demand is ‘currently outpacing the current ability to supply’. 

Latest news from within US and Chinese trade teams are that a path to an agreement could be within reach, with China’s top negotiator saying on Tuesday that they had higher hopes of a trade deal and that ‘consensus on how to resolve related issues’ had been found. 

Read more: Boost in non-EU trade for UK firms

A key sticking point had been demands surrounding intellectual property theft – estimated to cost businesses in the US $600 billion every year.

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Drop in sales for British exporters as Brexit uncertainty goes on

UK manufacturers are feeling the effects of a prolonged Brexit process as sales and orders drop into the negative, despite growth in the number of individual firms selling overseas.

The British Chamber’s Quarterly International Trade Survey for Q3 2019 found that the percentage balance of manufacturers exporting internationally reporting order increases dropped from 9% to -1%, indicating a decline in foreign trade. 

Confidence is also hitting local demand with domestic orders falling from 8% to -4% in the balance analysis. 

The state of cash flow for UK manufacturers also feel from 6% in Q2 to -5% – and down from 13% at the same time last year. 

The export of services is still seeing growth, albeit slower, at 8% compared to 12% with export orders levelling out. 

Adam Marshall, director-general at the British Chamber commented that: “A strong and balanced economy needs healthy exporters at its core. But while there are some companies bucking the trend, future sales and orders are now well into negative territory, after a steady downward trend in export performance this year.

“On top of Brexit uncertainty and global trade tensions, election turbulence won’t be helping. The next administration will need to most fast to restore confidence, with action to upgrade infrastructure, boost skills and cut business costs. 

Read more: Number of exporting manufacturers on the rise

“Without urgent clarity around our future trading relationship with the EU, firms across the UK will increasingly struggle to fill order books, and jobs and prosperity in many of our communities could be at risk.”

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Number of exporting manufacturers on the rise

The number of manufacturing companies in the UK who are exporting goods has increased to the highest levels in over a decade. 

Despite global trade difficulties, including within the EU, the Lloyds Bank UK International Trade Index has reported that over 81% of manufacturers exported goods in Q3 this year, up on Q2. That includes 75% of small manufacturers with less than 50 employees and 85% of large manufacturers. 

Best performing sectors included chemicals, plastics, luxury and sporting goods. 

However, total exports continue to fall with quarterly decreases worse than at any point in the last seven years. 

The exporting sales slump has been hardest hit by the automotive industry where falling production and a growing consumer shift towards electric vehicles has seen exports decline steadily over the past 18 months. 

Managing directors at Lloyds Bank Commercial Banking, Gwynn Master and Edward Thurman commented on the results that: “Change is in the air, whether it’s the move to electric cars impacting the automotive industry, a turn in the global electronics cycle, or climate change protests in London. In this environment, there is an opportunity and a necessity for firms to compete by innovating, adapting and collaborating across their supply chains.”

Read more: Boost in non-EU trade for UK firms

Growth for non-automotive sectors is still very much apparent, however, with nine in 10 of the UK’s top export markets experiencing economic growth in Q3. 

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Business Secretary gives 5 Brexit benefits for UK companies

The December election campaign is well underway in the UK with the two main parties set to pitch their financial agendas for the country today. 

Triggered and still dominated by Brexit, the campaigns will also focus on some of the big areas that have had little discussion time in the last three and a half years, namely the environment, education, healthcare and public services. 

However, talks of new hospitals, infrastructure programmes and wi-fi for all won’t matter all that much for UK businesses if the departure from the European Union isn’t sorted – quickly, efficiently and, critical for most, with as little disruption within the transition period as possible. 

Business secretary Andrea Leadsom spoke to Management Today this week about the incumbent government’s Brexit positioning and noted five areas in which she thought British businesses would be better off after leaving the EU. Here’s a quick look:

1 – Ability to attract international talent

Leadsom notes that Brexit will afford local businesses the opportunity to shop for the best industry talent within a global pool of candidates, supported by initiatives such as the new fast-track visa route for scientists and an extended post-study work visa for overseas university students to stay within the UK and apply their learnings within the marketplace. 

2 – Lead on clean energy

The government has set ambitious targets to generate £170bn a year from green economy exports by 2030, the date by which the UK has also targeted a net-zero climate change contribution. 

“As the first major economy to legislate to end our contribution to global climate change, we are perfectly positioned to seize the opportunities of the global shift to cleaner technology.”

3 – New trade agreements

Freedom from legislative alignment and EU rules would allow more flexibility to reform regulation of emerging technologies and the pursuit of free trade agreements with North America and Asia-Pacific marketplaces, particularly in the development of renewable energy, clean growth and electric vehicles – also stimulating additional foreign direct investment. 

“This will give British companies the freedom to explore new markets and secure investment from every corner of the globe.”

4 – Investment

EU funding programmes, which have supported many British enterprises, will be replaced with domestic initiatives more aligned and focused on UK priorities, ‘ensuring Britain’s businesses and regions have the support they need to thrive and expand productivity after Brexit’. 

5 – Fair and flexible labour market

Deregulation on worker’s rights has been cited as a real cause for concern in Boris Johnson’s current Brexit agreement with the European Union, but Leadsom says the highest standards are to be developed, including as part of the Good Work Plan. 

“This will increase fairness and flexibility in the labour market by strengthening workers’ ability to get redress for poor treatment and increase transparency and clarity for staff and employers, taking account of modern working relationships and routines.”

Election outcome to dictate period of Brexit uncertainty

Whatever the potential benefits (and pitfalls) of Brexit, what has harmed British businesses most is the length of the period of uncertainty that’s followed the EU referendum some three and a half years ago.

The outcome of the election will likely dictate for how much longer that uncertainty continues. A majority Conservatives win would see Boris Johnson’s agreement the primary way ahead. A Labour win would see a further six months of talks with a new agreement forged and a referendum put back to the British people (with remain on the ballot paper). A Liberal Democrat win would see Brexit cancelled altogether. 

Read more: Brexit delayed as EU grants extension: the positives and negatives for businesses

Whichever the outcome, what’s paramount is UK organisations are ready. Find out more about our Brexit consultancy services and how we can help your businesses prepare for whatever the outcome. 

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