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 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.”
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.
The Department of Agriculture has suggested it expects the pattern of trade to change following Brexit and warned that ‘not all exports can comply with new post-Brexit rules’.
Businesses exporting agri-food products into the EU which are not member states will require an Export Health Certificate – an official document which carries an authorised signature such as from a vet which proves that food or animal exports meet quality and health requirements of the importing country.
Trade cannot happen without an EHC and it’s estimated nearly two million will be required to accompany every agri-food export into the EU.
The Department of Agriculture stated that: “The best thing agri-food businesses can do is to prepare for these changes – as not all businesses will be able to meet the new Export Health Certificate requirements.”
However, some experts have warned that the resources don’t exist to deal with the extra paperwork – let alone enough vets to carry out the checks – and could severely disrupt Northern Irish trade in particular.
And it could see the competitiveness of local businesses in the EU market take a hit.
Peter Hardwick of the British Meat Processors’ Association told the BBC that: “I think you have to draw the obvious conclusion that you can’t do the business, that you will lose that business.
Read more: UK exporters step-up Brexit preparations as AEO applications surge
“There will be competitors in the EU who are no doubt chomping at the bit, who don’t have to jump through those hoops and they’ll be in a prime position to take it away from us.”
UK businesses are stepping up Brexit preparations and looking to prove their exporting credentials as the number of AEO applications surge.
Authorised Economic Operator (AEO) status shows that a businesses role within international supply chains as being secure – compliant and up-to-speed with customs controls and procedures.
UK firms have lagged far behind in AEO applications, just 537 in February 2017 compared to 6,031 in Germany in the same month.
However, with 31st October Brexit deadline fast-approaching and political rhetoric strongly suggesting an exit from the EU come-what-may, registrations have increased 26% – albeit to just 679 compared to 6,330 in Germany and 1,556 in the Netherlands.
Despite lagging far behind European partners, this increase indicates a clear step-change and that some firms have started to get their act together and cover as many Brexit bases as they can.
Lesley Batchelor, Director General of the Institute of Export & International Trade, commented that: “UK businesses are now realising that they will need to prove their competency in customs procedures when Brexit comes around – whatever form it may take.
“This surge in applications is encouraging, but there’s much more to be done before we catch up with our European counterparts, who will soon be our competitors.
“Attaining AEO status will be a useful exercise for exporters, whatever our future arrangement with the EU will be. The application process allows businesses to fully examine and ensure that its customs regime is up-to-scratch.
“Doing this will also put businesses in a strong position for other customs arrangements, including the Trusted Trader scheme.”
Read more: 500 new Brexit laws passed in H1 2019
Businesses are hopeful that applying for an AEO will ‘safeguard their attractiveness in the supply chain post-Brexit’.
Your businesses can apply for an AEO on the HMRC website and will be eligible if your firm is involved in the international trade of goods with non-EU countries.
Irish exporters to the UK are facing a ‘severe threat’ as sterling hit a two-year low.
With the arrival of new Prime Minister, Boris Johnson and a more steadfast approach to 31st October as Brexit day, the pound saw its value slide with the possibility of no-deal becoming increasingly likely.
Marry that with comments from Michael Gove that the government is assuming that no deal will happen, and the markets were more than a little concerned that the UK really could crash out of the European Union without a transitional agreement in place.
The Irish Experts Association has said that they are deeply concerned that the impact no deal would have on Irish exporters into the UK and the adverse effect of a weakening Euro-Sterling exchange rate.
Simon McKeever, chief executive commented that: “We note with deep concern the trajectory in the Euro-Sterling exchange rate over the past 36 hours. The profitability of Irish companies exporting to the UK is heavily dependent on the exchange rate, particularly at these levels.
“This recent sharp adverse movement, caused by the increased likelihood of a no-deal Brexit, is a serious threat to many Irish exporters if not sufficiently recognised, managed and mitigated.”
Read more: UK businesses reliant on EU imports ‘not even close to ready’ for no-deal Brexit
With Halloween fast approaching, many commentators have urged businesses to prepare now with figures suggesting just 23% of businesses have activated contingency plans.
Interim director-general of the IoD, Edwin Morgan said that: “With business costs rising in many quarters, and management time precious, it’s understandable that firms don’t want to put resources towards preparing for something we still hope won’t happen.
“But the risk of no deal is very real and so we’d urge all businesses, if they haven’t done so already, to carefully consider their exposure and draw up mitigation plans now.”
If your business is yet to fully prepare for Brexit, especially a no-deal outcome, then time really is running out to make sufficient progress. Find out more about Go Exporting’s Brexit consultancy and help to mitigate the risks – and capitalise on the opportunities.
An alarming number of UK businesses reliant on imports from the EU to operate are falling behind in their Brexit planning and would not be ready for a hard exit from the European Union, with a leaked Cabinet note warning it would take ‘at least four to five months’ to improve the readiness of British firms trading with the EU.
Research by Newsnight has found that just 10% of UK firms importing from the European Union have prepared for a hard exit and aren’t taking advantage of new government schemes to support trade with the EU.
The data hinges around the new Transitional Simplified Procedures scheme, launched by HMRC in February, which is designed to make it easier for businesses to import in the event of an abrupt exit from the single market and customs union.
The new scheme (TSP) would allow UK firms to import goods from Europe without the need to complete new customs declarations, whilst also affording a 12-month import duty payment delay.
According to Newsnight, just 10% of businesses for which the scheme would be applicable have signed-up, meaning nine in 10 UK firms that import from the EU would not be best positioned in the event of no-deal and would likely experience heftier delays.
Spokespeople from the British Chambers of Commerce commented on the figures that: “If it really is this low we’re far, far away from being day one no-deal Brexit ready – it’s a very low number.
“The TSP data is terrible. The top-level lesson is that most small firms are not even close to being ready for a No Deal scenario.”
In total, around 240,000 UK businesses would be affected and are eligible for the TSP scheme, but just 17,800 have so far applied.
In order to get TSP status, a company must first register for an Economic Operator and Registration Identification number from the HMRC.
Read more: UK firms trading with EU urged to apply for EORI number in preparation for No Deal
HMRC commented on Newsnight’s findings that: “Many businesses have already registered with HMRC as international traders – accounting for around two-thirds of the trade carried out by UK VAT registered businesses that only trade with the EU.
“HMRC’s plans include actions and easements to ensure that as many traders as possible are ready on day one to keep trading.”
If your organisation is unsure what crucial preparations and procedures should be put in place to ensure readiness for a hard exit from the European Union, talk to us today about a Brexit audit for your business.
New data has shown that 66% of the UK public supports free trade deals, with just 3% opposing them.
That’s the findings of the Department for International Trade’s first ‘public attitudes to trade’ tracker, a survey of 2,400 people across the UK that aims to calculate people’s changing attitudes to trade over time.
Giving reasons why they supported free trade, respondents most often cited cheaper goods, greater choice and improved opportunities.
Those who had greater knowledge and experience of international trade reported the highest favourability towards free trade agreements.
“This national survey shows overwhelming public support for free trade agreements, which puts us in a strong position as we leave the European Union,” commented International Trade Secretary, Liam Fox.
The UK government is currently working on a host of new free trade agreements in the run-up to Brexit, and with a no-deal exit from the European Union seemingly becoming a real possibility, new trade deals with the US, Australia and New Zealand could be crucial for British businesses to remain competitive on the international stage whilst also opening the door to new opportunities.
Public sentiment towards trade agreements is also mirrored in the British businesses community with a number of high-profile firms publicising the potentially devastating impact a no-deal exit from the European could have, including the car manufacturing industry which warns of a £50,000-a-minute hard-Brexit bill should a trade deal not be reached.
And with the UK economy having missed out on up to £550m a week since the EU referendum according to some calculations and three in four manufacturers reporting Brexit has damaged their strategy planning and prospects, businesses and the general public alike will be pushing for a favourable agreement and outcome to Brexit negotiations as 31st October looms large.
The performance of UK exports and goods over the last twelve months has continued to rise, reaching a new record high despite a challenging global trade environment and impending departure from the European Union.
In the 12 months to May 2019, overall exports increased by 4% to £647.1 billion with goods exports alone increasing by 4.7% to £357.1 billion, supported by an ever-increasing demand for British food and drink products abroad.
Total service trade surplus grew to £107.3 billion following a 3.3% rise, whilst in goods exports, the fuels sector contributed the most significant sector growth at nearly 26% to £39.3 billion.
These are the latest figures released from the Department of International Trade which this month celebrated its third anniversary to a 38th consecutive month of export growth on a year-to-year comparative basis.
International Trade Secretary, Liam Fox commented on the latest data that: “Despite the global headwinds getting stronger, today’s record-breaking statistics highlight what a real international trade policy can deliver for the UK as people from around the world continue to express their appetite for British goods and services.”
Read more: Scottish food & drink exports rise to record £1.4 billion
Continued export success for the UK comes at a time when weaker global growth, political uncertainty and of course Brexit have all held the potential to seriously weaken UK firm’s abilities to continue growing international sales.
Earlier this month, the World Bank announced in its Global Economic Prospects report that global economic growth is forecast to slow to 2.6%, below expectations, with no significant growth expected in 2020 either.
Citing restrained investment in emerging and developing economies, as well as weaker exports and investment within the EU, World Bank Group President, David Malpass commented that: “Current economic momentum remains weak, while heightened debt levels and subdued investment growth in developing economies are holding countries back from achieving their potential.”
“It’s urgent that countries make significant structural reforms that improve the business climate and attract investment. They also need to make debt management and transparency a high priority so that new debt adds to growth and investment.”
The report forecasts regional growth within Europe and Central Asia to steady at 2.7%, an increase on a sluggish 1.6% this year.
