After two decades of negotiation and amid a growingly protectionist political backdrop, the EU and South American member states of the Mercosur economic bloc have signed a trade deal that by some metrics is the largest ever agreed.
The deal, which will see tariffs cut or removed on goods and services between both countries, will deliver cheaper imported products for consumers and boost export opportunities & profitability for businesses within the two zones.
The market that will be created as a result of the deal will cover 800 million people – the largest trade deal ever signed in terms of population.
The new agreement comes a matter of months after another of the world’s largest trade deals was agreed, between the EU and Japan, which covers a third of global GDP and 635 million people.
The EU agreement with the Mercosur bloc, which includes Argentina, Brazil, Paraguay and Uruguay, will create a new business and export haven where firms can seamlessly trade, consumers can access cheaper products and economic growth can flourish, at a time where the US and China are locked in a tariff war.
Since 2016, the EU has also penned agreements with Canada and Mexico with the pace of discussion ramping up since Donald Trump’s arrival as US President.
EU trade commissioner Cecilia Malmstrom said of the deal: “They have been long negotiations – tough, difficult, and at least I have said many times ‘we are almost there’.
“Now we are. This is a landmark agreement.”
Where do recent EU trade agreements leave the UK?
The answer depends on the type of exit that the UK can agree amongst itself, and then ratify with the EU member states.
A no deal exit would essentially lose the UK and its businesses free trading access to the EU, Japan and now also the Mercosur trading blocks.
And lack of access also results in a lack of competitiveness. South America affords some of the hottest growth markets for businesses worldwide, but EU companies will be more competitive sitting inside a trade zone than the UK sat outside looking in. Companies and organisations within the Mercosur block will also invest more readily in EU countries, including setting up of new factories, distribution centres and offices.
Read more: UK carmakers warn of £50k a minute hard-Brexit bill as Germany reiterates desire for agreement
Indications of business intent are already in action, too, with both Nissan and Honda announcing plant closure and production cuts in the UK and moves back to Japan – which now has tariff-free access to the critical EU car market.
And the EU – Mercosur deal also highlights just how much time it takes to negotiate, agree and ratify such large scale trade agreements, the golden goose flaunted as the great opportunity for UK businesses once the EU departure has been finalised.
The Institute of Directors has warned businesses to pick-up the pace of no-deal Brexit preparations, saying British businesses have made little progress in planning for a hard exit this October.
The group said that businesses ‘cannot afford to put their faith in politicians to produce a Brexit resolution’.
A survey conducted of its members found just 23% had triggered contingency plans, up slightly from 18% in January, but more than half had no contingency planning in place at all with just four in 10 businesses saying they had plans to put preparations in place before Halloween.
Edwin Morgan, interim-director of the IoD warned that: “This week’s vote won’t be the last twist in the Brexit saga, but it made clear how real the possibility of no-deal is.
Read more: UK carmakers warn of £50k a minute hard-Brexit bill as Germany reiterates desire for agreement
“Business can have no absolute reassurance that an agreement will be reached, particularly given the commitment of some Conservative leadership candidates to leaving the EU in October with or without a deal. It feels like the extension is at risk of being wasted.
“If businesses can’t have faith in politicians, that means they have to look out for themselves.”
If your company is one of the thousands yet to formalise a Brexit strategy, find out how Go Exporting can help through a Brexit readiness audit.
The Society of Motor Manufacturers and Traders has issued a stern warning against a hard Brexit, suggesting border delays alone could cost the sector £50,000 a minute.
The prediction was published as part of the trade body’s report into the car industry – the country’s single biggest exporter of goods.
It warned that shipments of parts to manufacturing plants are measured in minutes and could add up to £70m a day in costs, before factoring in WTO tariffs, a combination which would see ‘a knockout blow to the sector’s competitiveness’.
SMMT chief executive Mike Hawes said in a speech on Tuesday that: “No deal remains the clear and present danger.
“The next PM’s first job in office must be to secure a deal that maintains frictionless trade because, for our industry, no deal is not an option.”
The trade body’s report elaborated further: “The UK might cease to be a party to all EU preferential trade agreements unless the UK government successfully replicates the effects of these treaties on exit day.
“The replication of complex trade agreements requires time, and the UK is unlikely to preserve preferential treatment with several key trading partners unless a transitional period maintaining the status quo is secured in negotiations with the EU.
“More than 16 per cent of UK cars are destined to preferential trading partners. Some of them are among the world’s fastest-growing markets for UK car exports.”
Any further delays or tariff costs for the sector would be a significant blow as consumer spending on new vehicles continues to slide. The latest CBI survey showed how sales volumes this month have registered the steepest decline in seven years.
Read more: UK car production down for national and global markets as manufacturers take early summer break
However, drive to deliver a deal is evident on the continent with the German ambassador to the UK, Peter Wittig, confirming at the same conference that he’s determined to forge an agreement – if a solution for the Irish border backstop can be found.
He commented that: “My country is ready to talk and the chancellor [Angela Merkel] once said she would be willing to talk to the last hour not to have a no-deal scenario.
“It’s a mindset. We are not giving up in achieving an orderly Brexit. Germany has been a very pragmatic voice in this whole tortuous Brexit process and we will continue to be that.
“Even if we have a short window while the new prime minister is in place, we will welcome any idea how to solve that famous backstop issue and we will be willing to work towards a negotiated deal which is long term the only viable and sensible option for Europe.”
The value of goods exports has increased once again across all four regions of the UK as demand for British products continues to grow overseas.
Through the 2018/19 financial year, Scotland recorded the highest growth, whilst Wales and Northern Ireland also returned strong international trade increases. England continues to deliver the highest trade value with nearly £252 billion in export sales from goods.
- England | +3% to £251.9bn
- Scotland | +12.9% to £32.8bn
- Wales | +7.5% to £17.7bn
- Northern Ireland | +4.4% to £9bn
The number of exporting companies also grew by over 5,000 to 110,831 in the first quarter of the year compared to Q1 2018 – a new record.
International Trade Secretary Liam Fox commented on the latest HMRC figures that: “Whether it is an exporter in rural Derbyshire or the Scottish Highlands, people and businesses across the world want to get their hands on British goods at unprecedented levels.
“The data released today pays homage to the hard work of people working in British businesses up and down the United Kingdom, who are now exporting their goods on unprecedented scales.
“I am delighted that exports continue to grow in every part of the UK, this shows we are working for every corner of our country and are not led by one region alone.”
Continued demands and goods sales from British companies overseas defeats some predictions that foresaw an international sales slowdown from UK firms following the EU referendum result.
Yet, with the latest Brexit deadline of 31st October approaching, and the next two candidates to become the next Prime Minister openly backing a no deal exit should no agreement be reached for the UK’s departure, demand for British goods and the number of exporting local companies has never been higher.
Read more: Scottish food & drink exports rise to record £1.4bn
However, many companies have invested millions of potential growth investment into preparing for a no deal Brexit already in goods stockpiling and in some instances, upping sticks to create new bases on the continent.
To continue export success it’s critical that all businesses that trade with the EU or rely on stock and components from within the single market are ready for whatever Brexit outcome on what seems to be an increasingly more certain 31st October deadline.
If your firm has only recently begun exporting or are yet to begin or finale Brexit strategy, see how Go Exporting can help audit your Brexit readiness here.
International sales of Scottish food and drink have surged to a record-breaking £1.4 billion in Q1 2019.
A healthy increase of 14% since last year, latest figures highlight strong demand in particular for Scottish salmon and, of course, whisky, which accounted for three-quarters of all export sales last year.
On the latest figures, Food Minister David Rutley commented that: “British food and drink is highly sought after around the world, with Scottish whisky, salmon and gin playing a vital role in this exporting success.
“More people worldwide are placing a greater importance on the quality and provenance of food and drink, and Scottish farmers and food producers are in an excellent position to benefit from this.”
Read more: Trade deficit reaches record quarterly high as British firms stockpile goods
And International Trade Secretary Liam Fox noted that: “It’s no secret that Scotland is renowned for its high-quality food and drink, and there is even greater demand out there.
“Recent HMRC statistics showed that goods exports from Scotland grew faster than any other part of the UK in the last financial year, now worth £32.8 billion.”
Car production in the U.K. has been cut almost in half as manufacturers induce an early summer slowdown.
According to the Society of Motor Manufacturers and Traders (SMMT), factories produced nearly 45% fewer vehicles in April compared to a year previously with just 71,000 cars rolling off production lines – 60,000 fewer than April 2018.
And production slowdown also occurred for overseas markets where there was a 44.7% rollback.
According to the SMMT, car firms have brought forward usual summer stoppages in a process including stockpiling of components, training and customs procedures that had been prepared for a 29th March Brexit.
Chief executive at SMMT, Mike Hawes said of the data that: “Today’s figures are evidence of the vast cost and upheaval Brexit uncertainty has already wrought on UK automotive manufacturing businesses and workers.
“Prolonged instability has done untold damage, with the fear of ‘no deal’ holding back progress, causing investment to stall, jobs to be lost and undermining our global reputation.”
The UK car industry is very much in recession with 11 consecutive months of output slowdown, but that forms only a small part of a larger industry picture by which global growth in car sales has seen significant challenges, brought on in part by the trade tensions between the US and China, as well as the growing electric car market spearheaded by the likes of Tesla and also tougher environmental controls.
Read more: Trade deficit reaches record quarterly high as British firms stockpile goods
“This is why ‘no deal’ must be taken off the table immediately and permanently, so industry can get back to the business of delivering for the economy and keeping the UK at the forefront of the global technology race,” Mr Hawes concluded.
The trade deficit remains far higher than forecast by City economists as British businesses continue to stockpile critical goods and components ahead of a delayed Brexit.
The deficit in Q1 this year hit £18.3bn, a record high for any three month period and nearly double the £9.4bn disparity seen in the final quarter of last year.
However, there are indications that businesses are slowing their inventory intake as the value gap between imports and exports narrowed to £5.4bn in March from £6.2bn in February, with continued narrowing expected before the end of October as businesses batton down the hatches.
We could still, however, see a flurry of late purchasing and stocking of raw materials in the run-up to the new Brexit deadline should a no-deal exit from the European Union look more likely than not.
Businesses have actually been more active of late, utilising the slight break to the imminent danger of a no-deal Brexit in much the same way as the housing market, with private-sector business activity rebounding in April with the services sector, in particular, returning to growth.
Read more: Brexit delayed again, but your preparations must go on
But for exporting firms, the value of the pound has added a further complication this month as values against the dollar and euro fell following the announcement that Theresa May will step down as Prime Minister and leader of the Conservative Party.
By Mike Wilson
In my last article writing for Cheshire Media Magazine, I speculated that there could be a delay to Brexit beyond the March 29th planned exit, yet questioned whether giving the politicians more time to argue would make any real difference?
Unfortunately, it turns out I was right and we sit here today, two extensions later, with the prospect of the turmoil and uncertainty carrying on until October 31st; although there is the option to leave at an earlier date if only the politicians can agree on something. As in February, however, this seems a remote possibility as I write this.
Read the full article here –
https://issuu.com/cheshirebusinessexchange/docs/may_june2019_digital_edition/66
Data from the ONS has revealed that the 5 fastest growing export markets for UK businesses are in Asia.
Figures released last month highlighted 40.8% growth in Taiwan, followed by 19.3% export growth in India.
Other emerging markets seeing significantly higher growth than the average of 2.7% for UK firms include Nigeria (up 18.3%), Thailand (up 17.8%) and Kuwait (14.1%).
The figures are a positive sign for UK businesses with HSBC predicting that 70% of future world growth will come from emerging economies, for which the UK has seemingly stolen a march.
Further research by the United Nations Conference on Trade and Development shows that by next year, Asian economies will be bigger than the rest of the world combined for the first time since the 19th century with Asia’s share of GDP expected t reach 35% by 2030.
International trade secretary, Liam Fox said of the news that: “Today’s figures show the rapidly growing demand for British produce in some of the world’s fastest growing markets.
“By 2030, Asia will represent 66% of the global middle-class and 59% of consumption, highlighting the need for British businesses to be reaching out to these markets now.
Read more: International demand for British gin & whisky delivers record export drinks sales
“With this in mind, we need to start thinking about markets which will dominate the centre of the world stage in years to come and to make sure we are operating there with success.
“I encourage businesses across the UK to be encouraged by today’s figures, as my international economic department stands ready to help connect businesses to emerging markets across the world.”
For exporting businesses in the UK, looking beyond the EU to find export partners in emerging economies such as across Asia represents a great opportunity to grow sales.
For advice on where to start and researching which territories could offer profitable export growth for your business, read more about our international trade consultancy.
Over three-quarters of small businesses in the UK feel unsupported ahead of Brexit, according to a new report.
A survey carried out by Simply Business uncovered that 76% of the 1,200 small business owners they asked feel like they lack the support they need in the run-up to the UK leaving the European Union, whilst 20% said they didn’t know where to turn for help and advice.
The survey also found that 35% of SME leaders have decided to delay growth plans, although this figure also highlights the majority of firms which are pressing on with expansion plans.
COO at Simply Business, Bae Montoya commented of the results that: “There isn’t a blueprint for what happens after Brexit, which is particularly challenging for the UK’s 5.7m hardworking SMEs.
“The self-employed are the backbone of the British economy, and they deserve more support and guidance – after all, it’s they who employ the majority of the UK workforce.
“A workforce which, according to our survey, is potentially at risk. Surely the government can clarify guidelines for what steps SMEs should take?”
Why it’s critical SMEs get the right Brexit support
Uk small businesses are the powerhouse of the UK economy, employing 16.3m people or 60% of private sector workers – in work. And whilst British stalwarts may get the headlines, small and medium-sized firms account for 99% of all UK businesses according to the Federation of Small Businesses.
And that’s why it’s critical small firms are as supported as possible when it comes how Brexit may affect their businesses, how to prepare and what to focus potentially limited resources on in the run-up to Brexit day.
Read more: International demand for British gin & whisky delivers record export drinks sales
Yet whilst it’s clear the pivotal role that small and medium-sized companies play in the UK economy, these firms are the most likely to lack the internal expertise and resource to effectively plan for and strategise against Brexit uncertainty now and any disruption in the future.
This is one of the reasons why Go Exporting launched our Brexit Consultancy, a cost-effective audit of business readiness for all eventualities of Brexit.
Go Exporting can help you navigate the Brexit minefield. Contact us today to arrange a review of the potential impact on your business.
