Saturday, January 16, 2021

British businesses creating new global trade footprint, report finds

British businesses are creating a new global trading footprint, according to a new report from Lloyds Bank and Aston Business School.

As the UK prepares to conclude its exit from the EU, nearly one in five British exporters (18%) have already changed trading partners to divert business outside the EU1, showing that businesses are actively looking at new export markets.

An estimated £50 billion of exports have been diverted since the Brexit referendum result in June 2016.

Aston Business School analysed 340,000 quarterly export transactions made by 26,000 UK exporters over a five-year period, finding that relative growth in export values towards the EU countries have decreased by an average of 8.7% per year.

This is driven solely by Brexit uncertainty as those diverting trade beyond the EU have primarily opened up trade relationships with established emerging markets within the BRICS (Brazil, Russia, India, China, South Africa).

Firms have also diverted trade to countries the UK has traditionally strong relationships with, including Commonwealth nations Australia and New Zealand.

Separate polling of 100 businesses in Yorkshire and the Humber undertaken in October for the report found 24% of the region’s firms have reviewed and made changes to their supply chain because of Brexit and 17% have diversified to create new opportunities outside the EU.

Gwynne Master, Global Head of Trade for Lloyds Bank, said: “While the clock is counting down to the end of the UK’s post-EU transition period, British businesses are building toward the future and forging new opportunities around the world. These findings are the start of a new chapter in the story of global British business and trade.

“This year in particular, our business customers have faced a myriad of challenges not least of which is the global pandemic.

“Despite this businesses are taking big strategic steps that will change the shape of their import and export business and the future of this great trading nation for years and decades to come.”

The report found plans are underway for further expansion beyond the EU. According to the polling, one in five (21%) businesses in Yorkshire plan to expand into new markets around the world. It also highlights business continuity plans, with 12% of the region’s businesses saying they are stockpiling to ensure continuity of service post Brexit.

The biggest shifts in trade diversion were by UK firms who export the least, which switched as much as 46% of new export growth to non-EU markets. For the next quartile up, this figure was 19%. Yet the analysis found that it was primarily firms who have the highest export values which were benefiting from the changes.

The research suggests that in some cases they might have taken the place of those trading less – potentially due to their ability to better manage, absorb and diversify the potential risks of a post Brexit world, and the likelihood that they are highly productive firms which export multiple products or services.

This is shown through the increase in growth in export values towards both intra and extra- EU countries despite there being a slowdown of the exporting of new products and destinations within the EU as a whole.

While evidence suggests trade diversion is already underway and British businesses are preparing for the unknown, insights from key business leaders tell us that there are still many key lessons to be learned.

Mitigating risks, managing overseas expansion and building understanding and awareness are all central to the success of opening up new trading opportunities beyond the EU in our post Brexit world.

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