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.
“Brexit has had more dates in the last year than I have” has been a popular quip on Twitter today following the EU’s announcement that member states have agreed to a new extension period.
The UK now has a deadline of 31st January to agree to a deal in Parliament. Just to add further intrigue, the deal is flexible and allows for Brexit to happen before that date should an agreement be reached. Entering a new term into the Brexit dictionary – ‘flextension’.
It’s a blow for Boris Johnson who’s primary message during his leadership battle focused on ‘getting Brexit done’ by the 31st October – no ifs or buts. And whilst his amendments to Theresa May’s deal, predominantly on arrangements on the Irish border, did garner enough support in Parliament to grant a second reading, the rejection of MPs to assess the new text in just three days has lead the UK to another position of uncertainty and, the word of the day – delay.
But is today’s news good or bad for British businesses?
The good news
The good news for UK firms is that a no-deal Brexit by the end of this week won’t be happening. Huge employers, particularly in the manufacturing sector, have been unified in their belief that a no-deal or ‘crash out’ exit from the European Union would be disastrous, cut jobs and result in further operational relocation onto the continent.
The delay also affords a further opportunity for SMEs who are still unprepared for an EU departure, whether on good grounds or not, to put some plans in place to deal with whichever eventuality comes from what will be by next year a near-four-year process.
It’s also worth noting that for many companies, Christmas is a critical trading period for which any disruption, including an agreed exit, would have proved extremely poor timing.
The bad news
What many business leaders have publically commented in the last few years is that it is uncertainty and not Brexit itself which is really harming UK business.
And for those businesses who have seen investment dried up or the firms who have growth plans stuck on pause, the wait for a clear and verified path forwards goes on.
Read more: No-deal red tape bill could cost £15bn
Ongoing delay also proves another blow to organisations who have invested millions in stockpiling goods and critical components who will now need to decide whether to continue paying to store them, start using them and buy further stocks next year or, indeed, try to get rid of what may now have gone out of date where perishables are concerned.
But for now, it’s as you were for UK businesses, and trade goes on.
New data from the Office for National Statistics has highlighted increased demand for British goods outside of the EU in the run-up to October 31st, predominantly with the US and China.
Trade with non-EU countries is currently growing twice as fast as with EU member states, with data showing a 4.2% increase in exports to non-EU countries compared to 1.6% on the continent.
Exports of goods and services to the US have increased by 9.3% in the year to June 2019 to £126.4 billion. Meanwhile, demand for UK goods in China have also seen significant gains of 13.9% rising to £23.7 billion. Japanese exports were also bolstered by 9.2% to £14.3 billion.
International Trade Secretary Liz Truss commented on the figures that: “Leaving the EU provides the UK with great opportunities to form closer relations with countries outside the EU bloc.
“Following my recent trips to the US and Japan, it is clear to see the potential that trading with our close friends across the world brings to the UK economy.
“Businesses are already making the most of opportunities such as the Rugby World Cup to take their products to market abroad. And there is so much more to gain. When we leave the EU, we will open more of these markets up to help UK businesses seize the opportunities in front of them.”
Read more: Post-referendum investment drop costs UK economy £20bn
Brexit of course still dominates business discussions and remains the primary cause for concern across sectors. However, as we’ve reported before, uncertainty regarding the nature of the UK’s departure from the European Union hasn’t directly correlated with reduced exports.
In fact, in the 12 months to May 2019, combined exporting of goods and services from the UK reached a new record high by increasing 4% to £647.1 billion.
However, those figures don’t account for lost opportunities for even further growth, and there’s much data to support the fact that Brexit is putting the breaks on business ambition, in particular within the recruitment of new permanent staff and also investment.
The cost of additional red tape and paperwork at the border in the event of a no-deal Brexit could reach as much as £15bn according to a new Government paper.
Filling in customs forms for trade between the UK and European Union would be just the tip of an iceberg of a ‘significant new and ongoing administrative burden’, HMRC warned.
The estimated bill was calculated based on the cost to businesses to complete all necessary paperwork to cover the 215 million export consignments crossing the channel in 2017. Some experts warn that the figure may not be high enough as the additional costs of new VAT procedures for service companies and parcels following a no-deal Brexit weren’t included in the calculations.
One-off costs to business such as preparing customs declarations were also not included.
HMRC commented that “The final costs of completing customs declarations will vary significantly from business to business depending on how often they trade.”
For individual businesses, it estimated that each consignment would cost £28 to complete the required forms and take an employee just under two hours to complete.
Read more: New online tool launched for exporters to report barriers to trade
Experts have warned that the new red tape and unfamiliarity with the paperwork will cause a major drag on trade affecting nearly a quarter of a million businesses.
If your business is still underprepared for Brexit, learn more about how Go Exporting’s Brexit audit and consultancy can help your business analyse and assess potential threats and create contingency planning for whatever the eventuality of Brexit might be.
The slump affecting the German manufacturing sector has continued this year with new figures from Destatis revealing a 6.7% year-on-year sales drop compared to August 2018, marking nearly two years of continuous decline.
Factory orders dropped 0.6% compared to July, twice the shrinkage predicted by economists, albeit an improved performance on the previous month’s 2.1% fall.
The primary driver of the drop in orders was from domestic buyers, however, suggesting the risk of recession in the EU’s largest economy.
The US-China trade war, eurozone slowdown and domestic economic issues have all been cited as causes for the slump.
Germany’s economy minister commented that: “The weakness in demand in the industry continues. The industrial sector remains subdued for the time being.”
However, some experts believe that digging further into the data, positive signs are there and the manufacturing slump may be bottoming out.
Read more: UK carmakers warn of £50k a minute hard-Brexit bill as Germany reiterates desire for agreement
Chief German economist at Oxford Economics, Oliver Rakau, commented that: “For one, orders are holding up better than gloomy surveys have predicted and it looks like annual growth is bottoming out.
“The current dynamics look a bit similar to 2012 when the euro crisis and the associated large tail risks weighed heavily on firm sentiment.
“Car sector orders also continue to outpace weak production with a further improvement signalled by the already released VDA data for September.
“No fast bounce, but a moderate turnaround looks likely.”
A drop in business investments since the EU referendum three years ago has cost the UK economy £20bn, according to new research.
Findings published in the National Bureau of Economic Research has found that Brexit has resulted in a 11% drop in investment whilst also claiming that productivity has taken a 5% hit as a result of the Brexit process as well.
The report suggests Brexit has proved a distraction amongst management within UK businesses, somewhat explaining the productivity slide, with 40% of UK firms ranking Brexit amongst their three top sources of uncertainty.
The paper noted that: “Brexit is unusual in that it generated persistent uncertainty – three years after the original vote, the UK had not left the EU, there was still no clarity on the eventual outcomes, and our survey results show that there was substantial unresolved uncertainty.
The research noted that firms most exposed to a hard exit from the single market and customs union – those with close trading ties and reliance on EU – had seen the most significant falls in investment levels. The level of investment drop-off was also seen to fluctuate, particularly immediately after the referendum and this year as the previous March 29th Brexit deadline day approached.
“The huge uncertainty surrounding the process and its persistent nature may have led firms to act cautiously and not cut investment as quickly as might have been expected.”
Not too late to plan for Brexit
The ‘next’ Brexit deadline of 31st October is now a matter of weeks away. Whilst the majority of large organisations have planned in advance, investing millions into moving assets and stockpiling essential supplies, many smaller businesses, in particular, are still massively underprepared and essentially ‘hoping for the best’.
Read more: £10 million Brexit readiness boost for UK businesses
It’s essential for all businesses who rely on EU trade, travel regularly into the EU or receive data from the continent understand how leaving the EU, either with or without a deal for a transition period, will affect their business operations.
Learn more about how Go Exporting’s Brexit audit and consultancy can help your business analyse and assess potential threats and create contingency planning for whatever the eventuality of Brexit might be.
Increased demand for tankers to ferry oil to Asia from the Gulf Coast has seen shipping prices skyrocket.
Less than a month following the drone attack on Saudi facilities at Abqaiq and Khurais which halved oil output from the region, prices had begun to settle somewhat. However, increased shipping costs are keeping prices high.
The issue is in the US Gulf Coast where the cost of chartering a VLCC, or very large crude carrier, has almost doubled to $10 million ($5 a barrel) since the attacks. As a result, prices have also increased for US oil exports – just as Asian countries including Japan and India are looking to replace lost deliveries and bolster stockpiles.
And as demand increases, the number of ships available to make the voyage has struggled to match, made worse with a number of Chinese ships blacklisted for allegedly carrying Iranian crude as well as a number of in-harbour tankers currently being retrofitted to comply with upcoming emissions regulations.
Read more: Concern for Irish exporters as sterling drops on rising no-deal fears
Analyst at RBC Capital Markets, Michael Tran commented that: “Asia has been pulling barrels from everywhere. If it becomes uneconomical to ship U.S. barrels to Asia, that essentially leaves barrels stranded in the U.S.”
Despite rising shipping costs, it’s expected that countries will continue paying the added fees now rather than risk oil prices increasing once more.
The government has launched a new online tool to help identify barriers for UK exporting businesses.
The aim of the platform is to help the government’s own trade experts spot potential legal, regulatory, labelling, licensing or any other unnecessary barriers to trade which can then be worked on with countries around the world.
Once a UK business has come across an issue that’s holding up international trade or investment, they can flag it in the tool which is then shared with the Department for International Trade.
Liz Truss, the newly appointed International Trade Secretary noted that: “Opening up new markets for British businesses is a top priority and the Department for International Trade has 1,000 people located around the world to help create more opportunities than ever before.
“I urge businesses to make full use of our new market access tool, which will help us to rapidly identify and knockdown unnecessary trade barriers.”
The government has also announced a lift on the Mexican government’s ban on British exports of food condiments containing beef, as well as reduced restrictions on vodka exports to Canada.
“In the last 12 months, we’ve secured wins to sell beef to Japan, langoustines to China and pork to Taiwan – just to name a few,” Truss continued.
“I am delighted to announce today that we’ve secured new wins to lift the ban on exports of products containing beef in Mexico and reduce restrictions on Vodka exports to Canada.”
Analysis
It’s an interesting move from the government as they essentially turn to local businesses exporting globally to self-identify and report barriers to streamlined and profitable international trade and investment.
Amongst the backdrop of Brexit and the impending disruption and potential new barriers to entry within the European Union markets, initiatives to help identify and iron-out issues affecting trade across the rest of the globe is a positive step forward – especially as businesses are encouraged to capitalise on the worldwide business opportunities available following the departure from the EU.
Read more: £10 million Brexit readiness boost for UK businesses
Although of course, finding issues once you start exporting is one thing, getting going in the first place is another. If your firm is thinking about expanding your business horizons, find out how our export consultancy can help.
Brexit is once again supposedly just weeks away. Whether it’s the new Prime Minister’s insistence that the UK will depart the European Union with or without the deal on 31st October, or the fact that Brexit Day now somewhat fittingly falls on Halloween, it could be that the months of uncertainty for businesses will be over sooner rather than later.
However, millions of small businesses in the UK, as well as some large firms, are still less than ready for a hard exit from the EU.
Some support is on hand, however, with the government announcing a new £10 million Brexit Readiness Fund to help businesses prepare.
The grant scheme, unveiled by new Business Secretary Andrea Leadsom, is designed to help organisations, as well as trade associations, organise training courses, webinars, events, workshops and any other strategies to boost levels of readiness ahead of Brexit.
Firms can apply for up to £25,000 each which is funded as part of the £108 million announced earlier in August by the Treasury.
Commenting on the grant launch last week, Leadsom commented that: “The UK will be leaving the EU on 31 October. For businesses that still feel unprepared, I am determined to do everything I possibly can to ensure they are fully ready for Brexit.
“We know that companies often rely on the wider business community for help and advice with planning. Business groups will now be given the necessary tools to engage with this crucial task, communicating with non-members and businesses of all sizes.
“The funding we are announcing today will mean business organisations from all sectors across the country can stand resolutely behind businesses large and small to support them in preparing for and seizing the opportunities of, leaving the EU.”
Businesses have until the 30th of September to apply.
Too little too late?
There have been calls from all sides of the business community arguing that the government hasn’t done enough to support UK businesses, either through grant support funding or the availability of information to auto-enrolment in new required documentation or certification schemes.
Only this month the Department of Agriculture warned that the pattern of trade will change following Brexit with the agri-food sector unlikely to be ready to implement Export Health Certificates should there be a crash-out exit.
The CBI also released a report in the last few weeks that suggested 24 of 27 critical economy areas are underprepared or have next to no plans in place at all, including tariffs, the Irish border and free trade agreements.
However, the number of Authorised Economic Operator applications have increased this year with firms looking to prove their exporting credentials.
For many small businesses, however, grant money won’t be enough. Many firms lack the in-house time and expertise to formulate a comprehensive pre-Brexit threat analysis and post-departure strategies to cover both an agreed and no-deal exit.
If your business is one of these, find out more about Go Exporting’s Brexit audit and consulting here.
The number of permanent staff hired by UK companies has dropped at the quickest rate in more than three years.
Research by the Recruitment & Employment Confederation, alongside a report from KPMG, has uncovered that the number of full-time recruits fell for six consecutive months to August, suggesting that ‘many firms [are] delaying hiring decisions due to Brexit-related uncertainty’.
And it’s not just companies tightening their belts as political and economical uncertainty continues. Candidates are also bedding in and staying put at their current organisations, whilst the number of available opportunities in the temporary employment market has also slowed – now at a six-year low.
However, new starters are enjoying higher salaries as competition for top talent continues to increase.
Businesses lacking confidence
Chief executive at the REC, Neil Carberry noted that: “The figures are a sobering reminder to politicians of all parties that national prosperity relies on businesses creating jobs and growing careers.
“Britain’s record on jobs is world-leading. It’s a key part of our economic success, with recruiters at the forefront of it. And there are still great opportunities out there for those looking for a new job and a boost in earnings.
“But all this rests on business confidence – the confidence to invest, to hire someone, to try something new – and it’s clear that things are getting harder. Permanent placements have now dropped for six months in a row and vacancy growth is slowing.
“While we continue to benefit from the flexibility of our jobs market as demand for temps holds steady, today’s survey emphasises the real-world impacts of the political and economic uncertainty businesses are facing.
“The first priority should be avoiding a damaging no-deal Brexit and giving some stability back to British businesses, so they can drive the prosperity of the whole country.”
Employees concerned by Brexit
As mentioned above, employees are also feeling the added worry as the Brexit saga rolls on.
A poll by Gartner found that on average, employees spend almost an hour each day worrying about how Brexit will affect them, their families and friends.
That’s 12% of the working day which will directly affect productivity rates and employee wellbeing.
If your business is falling behind in Brexit planning, see how our Brexit consultancy can help.
