The UK’s trade deficit with China has more than trebled over the last year.
Data from the Department for International Trade shows that the UK imported £40.5bn more from China than it exported to the country up to June 2021 – a 240% rise in just 12 months.
The surge has been caused by UK exports to the nation dropping 34%, whilst locked-down UK consumers spent big with imports from China surging 38%.
The latest data has prompted fears that the UK is becoming too heavily dependent on Chinese goods, whilst ongoing concerns over human rights could see the government follow the US in banning certain goods where forced labour may have been involved.
Liberal Democrat spokesperson on international trade, Lord Purvis, commented that: “It’s become apparent that the government is taking us on a very worrying journey of becoming heavily dependent on China for trade in goods, and moving away from our nearest market in Europe.”
Read more: UK Brexit losses dwarf new trade deal gains
However, the China British Business Council has said that the last 10 years have been a success for British businesses exporting into China – exports of which have more than tripled to £30bn, making China the UK’s third-largest trading partner.
One of the biggest changes for UK firms trading with the EU since Brexit has been Rules of Origin.
In order for firms to claim zero duty, they must be able to prove that goods are predominantly of UK or EU origin. These are complex rules, and something that we created a detailed guide and workbook to help businesses understand what these rules are.
Earlier this month we joined Enterprise Nation for a Lunch + Learn event all about rules of origin and how new rules are about to bite as we head into 2022 and discussed in detail the requirements and how you can probe the origin of your products.
Watch the event in full on the Enterprise Nation website here.
This month we partnered with Prodigo to deliver a specialist webinar exploring the export potential of Switzerland.
Often overlooked as a viable opportunity, the webinar examines the current business dynamics in the country, current trade relations with the UK, opportunities for British companies and how to approach potential Swiss partners.
Watch the webinar in full below:
If you’re looking to expand export activity into more EU nations, a good place to start is by making sure you’re up to speed with post-Brexit customs declarations, licenses, VAT on import and rules of origin.
Find out more in our free post-Brexit planning checklist here.
Swiss parliamentarians look set to unilaterally remove import duties on almost all industrial goods in a move that could come into force as early as January next year.
In a move designed to simplify Swiss customs tariffs for traders, the decision also aims to help reduce the high price of goods for consumers.
The policy is subject to a final vote but looks likely to pass, resulting in the Swiss tariff code downsizing from 6,172 tariff lines to 4,592.
Opportunity for UK firms
Trade between the UK and Switzerland is currently worth just under £31bn a year with a £5.8bn trade surplus in favour of the UK, making it the UK’s 10th largest trading partner.
The Swiss market is a surprisingly large opportunity for UK businesses, and it’s something that Go Exporting in partnership with Prodigo are going to outline in an upcoming webinar discussing key market sectors and how to do business in the country.
Britain’s export performance has slipped behind that of other developed nations as the recovery from the pandemic continues.
According to a report in the Financial Times, sluggish exports have become a ‘worrying trend’ as UK firms struggle to attract overseas markets.
By August this year, global goods trades rebounded well following the economic slowdown brought about by the pandemic. But whilst export volumes are well above pre-pandemic levels, the UK has struggled to get in on the action with export activity significantly lower than before Covid-19 hit.
In the three months to August, UK goods exports were down 13% whilst services dropped 14% too, whilst a longer six-year trend also shows UK bottom of a list of the world’s most advanced economies, including Canada, Spain, France and Greece.
Brexit hasn’t been the only factor either, with trade data showing sluggish activity with non-EU nations with a 20% drop in export activity compared to 2019.
“Supply disruption associated with both Covid and Brexit has weighed on UK competitiveness in general, not just on trade flows with the EU.”
Benjamin Nabarro, Citi Research
There are some nuggets of optimism though, with export activity showing strong growth with the Netherlands, Belgium and Ireland.
A trade deal between the UK and New Zealand looks to be imminent following a sixth round of talks.
A deal would be a big boost for exporters in the UK, especially in the gun, chocolate, clothing and car markets as tariffs look set to be dropped across a wide range of goods. UK consumers can also expect a wider range of lamb and cheaper New Zealand wine too.
Whilst the current amount of trade with New Zealand is quite small, just over £2 billion a year, it’s hoped that the deal would help to unlock access to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – a key target for the UK.
Access to the CPTPP trading zone would enable businesses to access a £9 trillion market with nations including Canada, Japan, Chile and Mexico.
Read more: UK may move for USMCA membership in the absence of immediate US trade deal
Former secretary of state for international trade Liz Truss commented in August that: “We are working round the clock to get this deal done in the coming weeks. We are both big fans of each other’s high-quality products, so this could be a huge boost that allows British shoppers to enjoy lower prices and British exports to be even more competitive.
“New Zealand and the UK are natural partners united by modern values. An agreement would reflect those ideals and is a win-win for both countries.
“It would also be an important step towards our accession to CPTPP, helping the UK gain access to 11 of the world’s biggest and fastest-growing economies across the Pacific region and opening doors to dynamic markets across the world.”
The UK is looking at alternatives to strengthening trade ties with the US as the chances of a quick turnaround on a bespoke trade deal look slim.
Prime Minister Boris Johnson is in Washington to meet US President Joe Biden, with the latter saying that a dedicated trade deal is unlikely in the immediate future.
Two core issues for Biden are the Northern Ireland protocol – something he has been vocally against over the last 18 months – and a deprioritisation on the US side to develop new bilateral trade deals, instead focusing on helping their economy recover from the pandemic from within and aiming to develop multilateral agreements instead.
Instead, the government could look to join existing trade pacts which would strengthen trade ties, namely the agreement already in place between the US, Mexico and Canada (USMCA). A series of mini deals could also be struck, including some British meat products now allowed to be exported to the US once again.
Johnson told reporters during his US visit that: “On the FTA [free trade agreement], the reality is that Joe has a lot of fish to fry.
“He’s got a huge infrastructure package, he’s got a build back better package. We want to do it, but what we want is a good FTA, a great FTA.
A back-door approach to stronger US trade ties could also be sought through the CPTPP trade agreement which also includes Australia and Japan – a pact that the US could join in the future too.
Read more: Complex Rules of Origin add £600m to duty costs
“We will keep going with free trade deals around the world, including in the United States,” Johnson continued.
“I have plenty of reason to be optimistic about that. But the Americans do negotiate very hard.”
A chief executive at Maersk has said that the ongoing shipping crisis won’t end until consumer demand falls.
Morten Engelstoft, who manages APM Terminals which is owned by Maersk, said that the sector needed to break out of a vicious circle of high consumer demand married with the ongoing pandemic.
He told the Financial Times that: “We need lower [consumer demand] growth to give the supply chain time to catch up, or differently spread out growth. Over a long period of time, we will need to recover efficiency.”
Whilst noting that ports need larger investment to improve and grow infrastructure, he added that soaring consumer demand from the US, in particular, was placing strain on the entire system.
“It’s a percentage of an enormous volume. The sheer size of business going through is so enormous that the amount of port capacity, truckers, warehouses and even labour to man all the equipment has created a bottleneck.”
Read more: Driver shortages, health certificate delay & post-Brexit FastTrack reviews
The port operator’s comments come days after UK retailers warned of expected Christmas shortages amid ongoing supply issues with supermarkets and large brands including Ikea and Halfords all saying they have shortages of certain in-demand products, from mattresses to bikes.
Increased consumer demand is being confounded by a global shortage of truck drivers, a lack of warehousing space and delivery delays due to the ongoing pandemic.
