New research from Enterprise Ireland has found that a third of exporting firms in Ireland have seen sales fall so far this year. To compound worries, a further 85% of the 728 firms surveyed said they also expect Brexit to add up to 10% to their operational costs.
However, although the overall picture looks bleak, certain sectors including digital and life sciences have seen sales growth of 30%.
And almost six in 10 of the companies questioned said they still expect their exports to grow and over 80% are planning to hire more staff next year.
CEO of Enterprise Ireland, Julie Sinnamon commented on the survey results that: “Irish exporters came into 2019 from a position of strength recording exports of more than €25bn in 2019.”
“However, 2020 has proven to be very challenging so far. While our clients have largely succeeded in retaining customers across the world, we know that customer contracts have declined by 10%, compared to last year.”
Last month, Go Exporting presented a free webinar alongside Enterprise Ireland discussing the opportunities within UK local authorities for Irish exporters. You can watch that in full below:
The Bank of England has warned lenders to bolster their no-deal Brexit planning in the event of a cliff-edge departure from the European Union at the end of the year.
Governor Andrew Bailey, who in his first few months in the role has already had a pandemic crisis to deal with, has called on financial firms to prepare, with a spokesperson noting that ‘it’s fundamental to the Bank of England’s remit that it prepares the UK financial system for all risks that it might face’.
Trade discussions between the UK and EU are ongoing with the Prime Minister shunning the idea of delaying the Brexit process due to coronavirus. The fourth round of talks is due to take place soon regarding the future trading relationship, yet key issues remain and time is ticking for an agreement to be reached in a period when the bandwidth of political bodies are stretched during public health and worsening financial emergencies.
Just last month the BoE warned that the UK economy is heading towards its sharpest recession on record, expecting a shrinking of 14% – dependent on there being no second wave of the virus and avoiding a second lockdown.
Bailey commented at the time: “Not all of the economic activity comes back. There’s quite a sharp recovery. But we’ve also factored that people will be cautious of their own choice.
“They don’t re-engage fully, and so it’s really only until next summer that activity comes back fully.”
However, some are optimistic of a largely ‘V-shaped’ recovery, where the decline was sharp but the return could be faster than a traditional economic slump.
Government schemes aimed at helping support the economy through the health crisis, including business grants, CBILS loans and the furlough scheme supporting jobs as best possible. Yet unemployment is still on course to rise above 9% from what was a record low at the end of last year.
The coronavirus pandemic has hit food and drink exports hard with a £700 million drop in value compared to 2019, equating to a 12.7% fall.
That’s according to the Food and Drink Federation who noted whisky, chocolate, cheese, salmon and gin as the hardest hit, pulling back on increasing demand over the last five years for British whisky, gin and salmon in particular.
However, pork saw an increase in value whilst the volume of vegetable and beef exports also rose.
Sales to the EU were the most impacted with total value falling by 17.4%, driven primarily by the immediate impact of Covid-19 as hospitality and travel sectors shut down across the continent.
But further afield, the picture is a little rosier. Outside the EU, demand has remained resilient with sales of branded food and drink products increasing in the US, Australia and China. Demand for cakes and baked goods in Australia grew 12% compared to the same period last year whilst the exports of gin, bottled water and infant food grew to £34m in China. Demand for British beer and soft drinks spearheaded near-7% overall export growth to the US too.
Head of International Trade at the FDF, Dominic Goudie, commented that: “Manufacturers and the other hidden heroes working across the supply chain have ensured continued access to essential food and drink for UK shoppers during this crisis. But we can now see how COVID-19 has impacted valuable overseas sales of UK food and drink that were worth over £23 billion in 2019.
“The closure of the hospitality sector in high-value export markets in the EU and further afield has been devastating for many exporters. However, we can also see that opportunities do remain in retail channels in many markets.
“Ensuring a quick return to growth will be essential to support resilience in our industry and also the UK’s economic recovery. We are working closely with Government and industry partners to set out a recovery plan that will deliver a return to sustainable export growth right across the UK.”
The government has agreed to temporarily guarantee trade credit insurance to support businesses struggling to get cover during the pandemic.
The guarantee will help both domestic and exporting companies within the supply chain.
With almost all sectors being financially impacted due to coronavirus, some firms have seen the number of payment defaults increase, making it harder to manage cash flow as well as more difficult to get trade insurance in the first place.
The scheme will launch at the end of this month with the government agreeing to a temporary reinsurance arrangement with trade credit insurers in a move which it hopes will ‘support supply chains and help businesses to trade with confidence as they can trust that they will be protected if a customer defaults on a payment’.
John Glen, economic secretary to the Treasure commented that: “This country’s businesses are crucial in helping us to kick start the economy as we get back to work, and I will do everything I can to help support them through this difficult time.
“By guaranteeing business-to-business transactions currently supported by trade credit insurance, we will help to maintain a vital cog in our economy.”
The Institute of Export & International Trade welcomed the announced, with the director of stakeholder management Kevin Shakespear saying that: “The continuation of a viable trade credit insurance market is essential for UK businesses and maintaining supply chains.
“For businesses selling in the UK, EU and the rest of the world there are benefits to using trade credit insurance to support payment terms, mitigate payment and country risk and in some instances support provision of finance for both UK and overseas sales.”
As UK-US talks on a free trade deal officially get underway, there’s hope in the SME community that an opportunity arises which will help mitigate some of the damage caused by Covid-19.
Almost 200 negotiators will be locked in detailed discussions, via video call, every six weeks in a deal that could see UK-US trade, already valued at almost £221bn a year, expand massively. The big hope for UK exporters is that tariffs imposed by the US, especially on farming, textiles, food and manufactured goods products, are lifted.
International trade secretary, Liz Truss commented at the commencement of discussions that: “The US is our largest trading partner and increasing transatlantic trade can help our economies bounce back from the economic challenge posed by coronavirus.
“We don’t just want any trade agreement. We want an agreement that will work for small business, an agreement that works for consumers and workers, and an agreement that will benefit all regions and nations of the UK.”
Currently, there are 30,000 SMEs in the UK exporting to the US and Federation of Small Businesses surveys have found that it’s the most important export market for these businesses – 46% saying it’s their key target region over the next three years.
Mike Cherry, national chair of the FSB commented that: “For small businesses, the US is the number one single market of choice for importers and exporters for the next three years, which is why these negotiations are so critical. With our economy likely to be suppressed for some time, we are going to need small businesses that trade to lead the way.
“Small businesses are already the backbone of the UK’s domestic economy. And especially in these difficult times, we now need to see their share of global trade start to catch up. We can do this by putting SMEs front and centre of all new trade agreements.
“Securing a pro-small business free trade agreement, which includes a comprehensive and dedicated small business chapter, will be essential to addressing the needs and distinct challenges that small firms face when engaged in transatlantic trade.”
Go Exporting’s free coronavirus Live Chat support service for exporting businesses has helped change the rules surrounding the government’s emergency loan scheme, making it easier for exporters to access funds.
The Coronavirus Business Interruption Loan Scheme has made £1.25 billion available to UK firms who have seen trade dry up due to the lockdown. However, for many exporting businesses, funds have been unattainable.
This was due to a clause in the scheme which meant that any UK firm achieving 80% of turnover from exports was not eligible.
One of those businesses struggling to access the critical funds got in touch with Go Exporting for advice on the issue. We advised them to contact their Chamber of Commerce which took up the issue whilst we consulted with the Federation of Small Businesses and the British Exporters Association – both of whom agreed the rule was unfair.
Further clarification from the British Business Bank, the administrator of the loans, was sought by the FSB, as well as the press being notified, which has now led to the government updating its guidance and clarifying that exporters are eligible to access funds.
Businesses who made contingency plans ahead of a potential no-deal Brexit could be better placed to mitigate the disruption and economic standstill caused by the coronavirus pandemic.
That’s according to directors at some British firms where scaling back investment and diverting capital to create stockpiles of critical components has left them in a better position to mitigate the new crisis.
Speaking to Bloomberg earlier this week, insulation business owner Dabid Merrick noted that: “We are drawing lessons from a process that has actually been a real pain for us.
“Every time there was a deadline, we’d have to pull together and build up inventory and find ways to overcome problems. And not investing in machinery has provided liquidity that would have been tied up in an asset. The crisis management we went through has helped.”
Another company director who has seen pre-Brexit business planning benefit him now is David Lenehan of Northern Industrial Electronics. His firm invested in remote-working software and training in preparation of a possible hard Brexit, as well as firming up travel plans across Europe to ensure the company could continue to service their primary customers.
Lenehan commented that: “We’re lucky we did that, although we didn’t think we would ever need 30 people to be doing it all at once.”
Yet whilst some firms have seen a glimmer of operational hope thanks to Brexit preparedness, most are suffering as a result of the pandemic. Over half of manufacturers have seen orders shrink by over 50% in the last month alone according to a MarketFinance survey. Two in three say they expect to run out of cash by the end of April.
The Department for International Trade has set out the support on offer for some 160,000 UK exporters and international investors.
Through direct communication sent last week, the DIT outlined how firms can secure export finance to enable them to keep trading during the pandemic as well as advice on other financial support available to businesses.
Another part of the financial support covers the eligibility to secure export insurance across markets ranging from the EU and Japan to New Zealand and Switzerland – available with immediate effect. This follows UK Export Finance expanding the scope of its export insurance policy.
International Trade Secretary, Liz Truss commented that: “During this turbulent time, we are taking every step we can to ensure UK exporters are protected and that the economy remains strong. As part of this, the UK government has emailed 160,000 exporters and investors across the country to outline the support measures available to them.
“The government’s network of trade, policy and business specialists across the UK and around the world will continue to provide support where it is most needed, to ensure the country can continue trading during this difficult time.”
The government has also announced plans to waive import taxes on medical equipment which will directly aid in the fight against coronavirus including ventilators, testing kits and personal protective equipment.
For more on what support is available for UK businesses, visit the government website here.
Today Go Exporting has launched a free Coronavirus advice and support Live Chat service.
The Live Chat is available to any exporting business to ask specialist questions and get expert advice on matters relating to international trade where Coronavirus has affected their business operations.
The service is designed to support exporters to navigate as best they can the choppy waters of the pandemic and emerge from lockdown in as best position as possible.
Access the Live Chat via the button below to ask a question.
Businesses are reporting that coronavirus is starting to impact their supply chains.
That’s according to a survey by the Institute for Supply Management of over 600 US companies which found that nearly 75% of firms are seeing capacity disruptions within their supply chains as a result of transport restrictions due to the pandemic.
More than six in 10 companies are also experiencing delays in receiving orders from China, whilst over half are struggling to get information out of the most affected country.
Thomas Derry, CEO of ISM commented on the results that: “The story the data tells us that companies are faced with a lengthy recovery to normal operations in the wake of the virus outbreak.
“For a majority of U.S. businesses, lead times have doubled, and that shortage is compounded by the shortage of air and ocean freight options to move product to the United States – even if they can get orders filled.
Companies with a more diversified supplier-base are reeling slightly less, especially compared to firms who rely on the Chinese markets for key components or, indeed, the vast majority of their imports.
As a result of the disruption, one in six companies have downgraded revenue targets.