Huge Brexit news this afternoon and evening as UK and EU officials confirmed that they have agreed a draft Brexit ‘text’. Talks between Theresa May and her cabinet members have been held today before further discussions tomorrow afternoon.

The news saw the pound surge against the dollar and the euro, though the cabinet and then Parliament itself must agree on the deal – the technical details of which only a handful of government ministers are yet to have seen.

But this draft Brexit agreement may have arrived just in the nick of time not just for the negotiating schedule and Theresa May but also UK businesses, for which confidence has been seriously waining over the last 12 months in particular.

Read more: SME firms suffering crisis of confidence

Numerous reports and companies themselves have confirmed that they’re delaying investment until the future is clearer, with recruitment levels dropping back too. In fact, it was only today that the latest ONS figures indicated the first decline in employment levels this year with those out of work rising by 21,000 to 1.38 million.

That’s despite hundreds of businesses saying there’s now a serious shortage of migrant workers in the UK and vacancies are becoming harder to fill. Gerwyn Davies of CIPD who conducted the research said that: “The data implies that the pendulum has swung away from the UK as an attractive place to live and work for non-UK-born citizens, especially non-EU citizens, during a period of strong employment growth and low unemployment.

“This has heightened recruitment difficulties for some employers.”

Yet, whilst a draft text has been confirmed, the Prime Minister still faces what is likely to be an even bigger hurdle in these negotiations – opposition parties and Brexiteers within her own party, many of which have been quick to jump in front of cameras this evening to lay their positions and likelihood of voting against whatever the draft agreement may be.

In reality, a deal is within the grasps of Number 10, but no-deal is still a real possibility if what’s on the table as the cabinet meets tomorrow afternoon fails to satisfy anyone in the room.

But businesses say they cannot afford a no-deal scenario. Firms, including the owner of Oxo, Bisto and Mr Kipling, have already started to stockpile ingredients and supplies in case of no-deal and gridlock at UK ports.

Other businesses are calling for the government to put in place similar private sector bail-out plans to that of the 2008 economic crash to avoid wide-scale bankruptcies.

The IoD’s Allie Renison said: “As long as it remains government policy to potentially walk away, it is incumbent on them to make further provision to help firms be fully ready for the consequences of that outcome.”

Read more: Have UK manufacturers already lost out because of Brexit?

And one of those provisions, according to the chief executive of the Food and Drink Federation, Iain Wright, should be government bailouts of private companies.

He said in an interview with Politico that: “If the UK does fall over the Brexit cliff edge, ministers must leverage the government’s financial muscle … in rather the way they did for the banks during the crash.

“If the government was to say no now there would be a very big question from British industry: ‘You were prepared to fund the banks who brought the crisis on themselves… but you’re not prepared to support British business which is completely innocent of any fault in the current circumstances?’”

Some have already started preparing to support businesses within their umbrella who may need support. RBS has put aside £2 billion to support SMEs through Brexit if required.

But with the IoD reporting that just one-third of its 30,000 members have contingency plans in place should there be a hard or cliff-edge Brexit, it is still paramount that businesses take it upon themselves to ensure they’re ready and prepared for any eventuality – however close to midnight the Brexit clock strikes.

If your firm is yet to put in place actionable Brexit plans and procedures and you rely on export sales or import supply, find out how we can help right here.

The Brexit saga continues…

The number of small and medium-sized businesses in the UK expecting growth has dropped to its lowest point in nearly 10 years according to a new report.

The research called the UK SME Manufacturing Barometer, conducted by SWMAS found that 13% fewer firms asked expected to see their revenues increase over the next six months.

Two in 10 manufacturers reported they expect a drop in sales between now and March next year, whilst 28% have already seen a sales decline in H1 2018.

The drop in SME confidence and an evident decline in current sales levels for some is starting to have a knock-on effect on investment, with under 40% set to increase in their firms’ and a 12% fall in the number of small-medium manufacturing firms looking to recruit more staff in the immediate future.

Managing Director of SWMAS, Simon Howes said of the research findings that: “What we are clearly witnessing is manufacturers putting the brakes on new investments and recruitment whilst some enter survival mode caused by ongoing Brexit uncertainties.

Read more: Have UK manufacturers already lost out because of Brexit?

“However, we are also seeing signs that suggests our SME manufacturers are looking at their own ways to change and adapt to meet the Brexit challenge, such as intentions to start exporting or to export more, development of new products and improvements in efficiency and productivity.”

The good news and potential opportunities

Whilst this latest UK SME Manufacturing Barometer paints a rather bleak picture, there are still causes for optimism.

For example, 51% of the businesses questioned do still expect to see revenues grow over the next half-year.

And away from this latest research, the last 18 months has been extremely strong for UK exporters as a whole.

UK exports reach record levels last year, topping £616bn with marked growth in both good and service exports. Interestingly, 55% of total export value was derived from outside the EU market.
Internatl Trade Secretary, Liam Fox noted that: “British goods remain in global demand as exports to non-EU countries continue to grow.

“It shows the confidence the world has in our goods and is important as 90% of growth in global trade will come from outside the EU.

A further annual report conducted by the OFX found that, whilst confidence may be slipping according to the above data, some 62% of 500 business owners it quizzed said they were confident of achieving sales and doing business outside of the UK with a further 46% of SMEs specifically saying that Brexit was yet to affect their desire to grow through exports over the coming years.

Read more: Meet the sectors not overly concerned about Brexit

And the opportunities for businesses yet to begin exporting are more than apparent. Last year, the average international revenues for UK businesses topped £50,000 with a 47% increase in overseas sales in 2017 compared to the year previous too.

Mike Wilson, CEO of Go Exporting comments that: “Much as I mourn the decision to exit the EU, Brexit need not be negative, act now and plan properly and it could open a world of opportunities.”

Go Exporting has helped companies open new markets around the world, from Germany to Canada and Saudi Arabia. Find out how we could help your business grow on the international stage through our export consultancy.

We’re very much into the final straight of EU negotiations but despite wranglings of the Irish border and varying preferred versions of Brexit from within British politics, a favourable deal offer is already on the table – and has been from the very start.

That’s according to Jean-Claude Juncker, President of the European Commission, who said this week that: “From the very beginning, the EU offer has been a Canada+++ deal. Much further-reaching on trade, international security and foreign policy cooperation. This is the true measure of respect and this offer remains in place.”

He went as far as to suggest a deal could be reached within weeks, if not October then by the end of November.
This news will be welcomed by pretty much everyone, from UK businesses small and large and those who are geared towards keeping close ties with EU neighbours – as well as those who voted remain in the first place.

So, presuming a Canada+++ deal is struck, or at least a very close variant, what can British businesses expect?

‘Super Canada’

So what is Canada+++? Also referred to as Super Canada, this agreement would be based heavily on the agreement which Canada has with the European block regarding trade and numerous other integrations. But the +++ element will mean a ‘much further-reaching on trade, on international security and on foreign policy cooperation’.

Read more: Meet the sectors not overly concerned by Brexit

Canada’s current deal with the EU took seven years to negotiate and, although still undergoing ratification, its aim is to remove nearly 96% of tariffs between Canada and EU member states, although charges will remain on food and agriculture.

It’s almost unanimously frictionless trade, but without Canada having direct access to the EU’s financial, energy or aviation markets – three critical markets for the UK.

So that’s where the +++ suffix comes in.

Under Junker and Donald Tusk’s proposals, the UK would retain access to these critical markets, avoid the majority of tariffs for all markets and also, and crucially for Brexiteers, be able to negotiate further trade deals with countries outside the EU.

But if it sounds too good to be true, that’s because it likely is. Such a deal would leave Britain potentially far better of as a result of Brexit. The same close ties across security and policy-making, frictionless trade AND freedom to develop trade agreements. The EU is certain to ensure that the UK doesn’t set an example of the benefits which can be gained from angling to leave.

So, Canada+++ will likely include some sizable caveats. Britain, put simply, will not be allowed to freely ‘cherry pick’ what it wants.

The main caveat is likely to be surrounding the free movement of people, a major reason why 52% of those who voted in the UK referendum crossed the ‘leave’ box. This won’t sit well with the general public or politicians who would deem agreeing to such a caveat as in direct contrast with the ‘will of the British people’.

Another caveat will be that the UK would still have to abide by numerous EU laws but without having a direct say in how those laws are constructed and implemented, many of which could apply to trade that UK companies are carrying out.

And then there is the primary issue – the Irish border for which many suggest Canada+++ would only apply to mainland Britian, creating a virtual customs border in the Irish Sea.

This is a red line for Theresa May and indeed Arlene Foster.

However, David Davis, Boris Johnson and Nigel Farage have all earmarked a boosted Canadian deal as a clear step in the right direction.

What Canada+++ would mean for business

So, despite a lot of wrangling and late-night meetings in the run-up to deadline day to be had, what would a Super Canada deal look like for British businesses? How much would change?

Firstly, there would be no cliff-edge scenario, and little reason for EU buyers to seek trade with providers closer to home as the majority of goods exchanged would remain tariff-free.

It would also drastically cut the period of uncertainty that would otherwise arise from a no-deal scenario where the UK would need to negotiate potentially hundreds of bilateral trade agreements with EU member states. Investment in British companies would likely continue at a similar pace and confidence in the UK economy would benefit compared to other potential Brexit routes.

But Canada+++ is, in essence, a generous free trade deal and not a legally-binding free-market access card, so certain goods and services may still entail charges and tariffs and levels of disruption, albeit a small proportion.

The amount of paperwork involved might also increase as exported UK products could undergo quality and regulatory-compliance checks once it arrives at EU trade ports. This, though, can be negotiated away as Canada has done in their agreement, although checks can be brought in by either party in the future should they choose.

There would also be no limitations for EU investment within the UK from companies or indeed foreign governments, and the UK would be essentially free to negotiate new trade deals with international partners.

A Canada+++ deal would also offer a number of protections. Intellectual property rights will remain unaffected, and a British musician would still be able to obtain royalties if their song is played in a Spanish cafe.

Read more: Have UK manufacturers already lost out because of Brexit?

Also, geographical indication protections will remain in place. So, Scotch whisky can only be bought and sold across the block if it has indeed been made in Scotland. The same will remain true of Cornish clotted cream, Jersey royal potatoes and the Cornish pasty too.

But Super Canada is just one potential outcome of the Brexit negotiations. The UK could crash out of the EU on WTO rules which would cause major upheaval for both UK and EU trading partners.

With less than six months to go before a deal is or is not struck and the two-year implementation period is entered, the critical advice for all exporting businesses is to ensure they’re prepared for any eventuality. Find out how Go Exporting’s Brexit consultancy can help safeguard your company’s trading future here.

It’s been another topsy-turvy few weeks in the business of Brexit as Labour reaffirmed its position and likelihood of rejecting pretty much any deal which Theresa May manages to bring back from Brussels.

But towards the back-end of this week, the rhetoric has become slightly more positive with the chances of a Brexit deal having ‘increased’ according to the European Commission.

Combine that with chief negotiator Jean-Claude Juncker confirming that a Canada+++ offer is well and truly on the table for Britain and things might appear to be heading in the right direction.

He noted that: “From the very beginning, the EU offer has been a Canada+++ deal. Much further-reaching on trade, internal security and foreign policy cooperation.

“This is a true measure of respect. And this offer remains in place.”

But his news conference was also barbed with accusations that confusion amid Britain’s own demands is holding up the process – and it’s that confusion which may have already proven costly for some manufacturers in the UK before a deal has been struck or an agreed deadline passed.

A report carried out by the University of Sussex surveyed 1,000 exporting manufacturers in the UK and found that one in three had already started to feel the negative impact of Brexit through loss of business or decreases in investment. Some reported a sales shortfall of up to 30%.

Many of those quizzed noted that they were preparing for a cut in investment in the short to medium term, whilst other firms also highlighted concerns surrounding a shortfall of skilled workers.

Professor Alan Winters, part of the University’s UK Trade Policy Observatory said of the results that: “Our research reveals that Brexit is already impacting British exports.

“In the event of a no-deal exit from the European Union, Britain’s trade with the EU will be badly hit, hundreds of thousands of jobs will be at risk and real wages are likely to be cut.”

Read more: Meet the sectors not overly concerned by Brexit

But its delays and the ultimatum of a ‘no deal’ which concerns UK manufacturers most of all. A report released alongside the study from Euris, a task-force of 13 UK trade associations monitoring and assessing the impact of Brexit, stated that: “Our industry needs clarity and a withdrawal agreement confirmed with the European Commission in the autumn.

“As this report and our member survey clearly show, further delays and the risk of no-deal will result in significant long-term damage to the UK manufacturing sector.

“Those UK manufacturers who are in supply or value chains with companies based in EU27 states will likely find that they lose contracts and are dropped from tender lists as their customers or corporate groups seek to preserve their ability to certify the end product as being of EU origin.”

Larger scope of business sectors more optimistic

Despite the doom, gloom and stark warnings of the University of Sussex’s report, across a wider range of UK business sectors, the outlook is a little more optimistic.

Further research carried out by Close Brothers Asset Finance found a number of sectors whose current outlook is that Brexit is more likely to have a limited impact on their business.

Indeed, whilst 32% of wholesale and distribution firms said they thought their business would suffer as a result of Brexit, 60% of those firms also said they thought their business would neither benefit OR suffer.

Recruitment companies reported that they expect to see a beneficial outcome from Brexit, potentially as any skills gap can inflate wage demands and as such agency fees.

Read more on that report here.

There appears to be something of a thought gap when it comes to Brexit and business. On the one hand, various politicians thought leaders and media outlets will tell you the disaster that will incur after leaving the EU – especially in a no-deal scenario.

But the other hand, held by businesses on the ground across the country, appears rather more relaxed and even lackadaisical with the whole prospect.

In a write-up last week we noted how many exporting SMEs are yet to factor in Brexit with just 34% of those asked in a far-reaching study saying they had a specific post-Brexit exporting plan.

And further research from Close Brothers Asset Finance suggests that there are specific sectors who aren’t overly concerned by leaving the EU at all and think it will have little impact on their operations.

More on those sectors later on.

The study, which surveyed 900 firms, found just 29% said Brexit would cause harm to their businesses and reorganising of the supply chain would be required.

Twenty per cent said they believed their businesses would actively benefit from leaving the European Union.

On the research, CEO at Close Brothers, Neil Davies commented that: “Looking at the figures, with 51% selecting the ‘neither’ option, it’s clear that the continued uncertainty means businesses have little idea of the impact a reorganisation will have.

“It’s not something they have ever had to deal with on this scale.”

So which sectors are worried, and which aren’t overly concerned at all?

As you can see from the table above, a high proportion of sectors are learning more towards thinking that Brexit will have little impact on their business – including print & packaging, wholesale, distribution, services and retail.

And as you’d likely expect, it’s the sectors which regularly do business on an international stage that are most concerned, such as transport, haulage, engineering, manufacturing and also wholesale & distribution – a sector that is least optimistic of Brexit delivering tangible benefits over major headaches.

“It clearly demonstrates that in the absence of certainty, businesses have taken it upon themselves to assess the impact leaving the EU will have on the supply chain which, for many businesses exposed to Europe, is critical,” concluded Davies.

Read more: Many exporting SMEs yet to factor in Brexit

“In the key sectors that have strong relationships in and with Europe, including engineering, manufacturing and transport, planning is advanced and above the national average of 47% who admitted they’d started their planning.”

But is the lack of apparent concern down to a lack of understanding of export markets and how they operate, or the misunderstanding of how closely tied Britain and the EU are as a trading block? Do businesses understand the complications of a no-deal Brexit?

If your firm needs advice and wants to ensure all angles are covered, whichever Brexit is delivered, you can talk to Go Exporting about our Brexit consultancy services.

Liam Fox has written an article for The Sun in which he encourages Britain’s small businesses to become ‘intrepid exporters’ whilst reinforcing the view that Brexit is a pathway by which the UK can become a trading superpower.

The International Trade Secretary has been busy on the public relations front, sharing positive and motivational business call-to-arms in a bid to change the commercial mindset in the run-up to 29th March from that of retreat to a tone of conquering instead.

The main line is hard to argue with – countries and businesses around the world want to business with Britain, as Fox writes: “EVERYWHERE I go across the world, everyone I meet tells me that they believe in Britain.

“They want to buy British products, use British services, learn English. They trust our laws and our financial services, they admire our Armed Forces and they envy our universities.

“Actually, that’s not quite true: everywhere I go in the world, except right here in the UK.

“Britain can and should be confident and the world needs a confident Britain. A confident Britain can bang the drum for free trade across the world, as more and more countries look to pull up the drawbridge and turn away from the huge benefits that we have seen in poverty alleviation.”

Fox’s article prepends a week in which Theresa May has been dancing her way from one African state to another discussing future trade, whilst the rhetoric in Brussels has also changed from that of playing hardball to a little friendly, maybe even neighbourly, support, with Michel Barnier teasing that “We are prepared to offer a partnership with Britain such as has never been with any other third country.”

Read more: New government export strategy aims to make Britain ‘ 21st-century exporting superpower’

Two days later though and headlines on any Brexit-related Google search are met with the following headlines:

– Barnier ‘strongly opposed’ to May’s Brexit plan
– RBS warns of no-deal Brexit loss of customers

Still a long way to go then.