Chris Southworth, Secretary General at the International Chamber of Commerce UK, writes exclusively for Director of Finance.
The past year has been volatile for UK business, filled with constant political and global uncertainty, but there is room for optimism. Recently, Prime Minister Theresa May outlined her vision for a “Global Britain”, with the UK becoming a champion of free trade, boasting new trade agreements. Ambitious or not, it is a great vision, and one that might push UK businesses to build trading relationships for goods and services all around the world.
Global trade is highly competitive and UK business must retain its edge. While Europe is likely to remain our largest trading partner, even after the Brexit process is complete, some companies would do well to view Brexit as an opportunity to establish new relationships with global institutions and networks. Both will help strengthen knowledge and skills and help manage costs and risk. It is in everyone’s interests to work with government to create a positive business environment outside the EU.
So where are the opportunities?
Positive signs for a UK-US trade deal suggest it could be a worthwhile option – indeed, a World First report focusing on small to medium-sized enterprises (SMEs) showed that over 20% of UK exports of goods and services already go to the US and Canada – something that might increase.
Similarly, the UK has strong ties with the Middle East, and rapidly growing economies such as the UAE are increasingly demanding imports of goods and services in the infrastructure, healthcare, retail, and tourism sectors.
Meanwhile, Africa, which counts the largest number of Commonwealth members of any continent, only accounts for 2.6% of the goods exported by the UK. Countries such as Ethiopia – with a large population, growing middle class, and low levels of corruption – deserve consideration, especially in the energy, construction, and food and drink sectors.
Asia rounds off the regional opportunities; with many countries boasting GDP growth over recent years that is the envy of those considered “more developed”. As many shift towards service-based economies – especially frontier countries such as Indonesia – the UK’s renowned financial services and technology industries stand to gain.
And, in terms of consumer goods, we should not forget the value of “Brand Britain” abroad. India is a large and hungry consumer in this respect, as is China, which is expected to become the leading luxury goods market by 2020.
Of course, maximising opportunities in unfamiliar markets is no easy task, and forming new trade relationships can be daunting. Indeed, there are a number of trade barriers to consider, including customs procedures, transport issues and financing solutions, not to mention diverse business cultures, languages and regulatory structures.
This is where global business organisations come in – helping to ensure businesses are well prepared to expand their operations, and at the same time helping international markets prepare to welcome them. Organisations such as the International Chamber of Commerce (ICC) can act as a middle-man, championing inclusive solutions that work for all stakeholders (investors, exporters, importers, economy, and society). In addition, they promote dialogue among policymakers, civil society, and business in order to provide UK business with a more coherent voice on the world stage – guaranteeing that prospective trade partners are aware of UK business’ key trade areas.
Working with UK government to align national efforts with the G20 is a crucial part of this, with the aim of increasing the UK business profile at the intergovernmental level. In fact, only 13 UK companies are engaged in B20 Germany 2017. And 50% of those are from financial eservices and none of them is from outside of the M25. In a post-Brexit environment, this engagement will need to improve if UK business wants to have any influence.
Fortunately, ICC aims to strengthen co-operation with major investor nations (Ireland, India, Japan, and the US, for instance) through a presence at major international summits. Developing policy products, including statements to shape intergovernmental discussions, as well as rules and codes to facilitate international business transactions, conveys UK business views on international trade. This ensures that UK business priorities are addressed and that they are able to tap into the array of trade opportunities available to them.
Promoting the importance of free trade is crucial in order to counter the rapid spread of protectionist measures. For example, ICC’s Global Alliance for Trade Facilitation has played a major role in helping to secure the recent ratification of the WTO’s Trade Facilitation Agreement (TFA), which contains provisions for faster and more efficient customs procedures, making trade easier, quicker and less costly for businesses of all sizes. When implemented, this agreement will increase global merchandise exports by up to US$ 1 trillion, create 20 million jobs and reduce trade costs by 14%. The big winners will be SMEs and emerging markets, both top trade priorities for the UK. It is a perfect example of the kind of initiative UK business should support.
Finally, UK businesses looking to export need advice on a number of aspects relating to planning, distribution channels, and the logistics of shipping and transport. Effective guidance on how best to research the opportunities and challenges in new markets is becoming increasingly available through government initiatives, such as Exporting is GREAT, as well as from business organisations. But it is up to UK businesses to tap into the available guidance and resources.
Yet, no matter how supportive organisations are to UK business agendas, none of this matters unless government provides UK business with the infrastructure to trade and plays a proactive role with business to improve the trading environment outside the EU.
UK businesses can and should voice their support for multilateral trade agreements, as a proliferation of bilateral trade agreements will add more complexity, costs and red tape. They can voice their support for the removal of trade barriers. And, most importantly, they can voice their support for the implementation of the WTO’s TFA.
Trade helps drive sustainable growth, quality job creation and increased consumer choice, if national governments have the right policies to support it.
It is true that Brexit, while problematic for UK trade, does create the push to export further ashore, and to markets that are particularly receptive to British goods. It is also true that we will not be able to make the most of these opportunities without government and intergovernmental support. But, above all, it is true that if UK business speaks, and insists on free trade and multilateralism, and speaks loudly enough, and through global business channels, governments will listen.