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.
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:
- Substantially increasing revenue and growth
- Reaching a new customer base
- Surviving the year
- Generating return customers
- Breaking even
- Introducing new products/services
- Increasing social media presence
- Building or updating website
- Expanding marketing/advertising efforts
- 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.
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.
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.
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.”
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.
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.