Brexit has the potential to have a big impact on how Britain trades with the world and which countries it trades with. Currently the EU accounts for roughly half of Britain’s exports. But this could all be about to change.
A record high
The most recent figures from the Department of International Trade show that in the year to March 2018 UK exports rose to £620.2 billion – a record high. In the view of International Trade Secretary Dr Liam Fox, this shows that ‘far from the negative forecasts after the EU referendum, there is every reason to be optimistic [about UK trade]’.
On the back of these figures, the government has laid out its vision to transform the UK into a ‘21st century exporting superpower’. Their new export strategy could boost total exports to 35% as a proportion of GDP. If successful this would create jobs, raise wages and grow the UK’s economy.
Trade with the EU
However, trading with the EU – which currently accounts for almost half the UK’s exports – could be about to get a whole lot trickier. If we exit both the single European market and the customs union British businesses exporting to EU countries may soon be faced with potentially prohibitive administrative, financial and legal barriers. The financial advantage that currently exists in trading with EU countries because they are in such close proximity to the UK could disappear.
International trade
So, to succeed, the UK’s export strategy needs to shift focus away from the EU and focus on strengthening trade links with the rest of the world. Currently, there is a huge gap in the market between demand and supply for UK products in the Non-EU market. Brexit offers a chance for Britain to re-establish itself as a truly independent country with strong connections to the rest of the world.
For example, Asia. UK exports to India and China already grew by 31% and 15% respectively last year. There is increasing demand across the region for British goods and both Asia’s economies and populations are growing. Strong historic links between the UK and Asia plus Britain’s reputation for manufacturing quality goods mean trading with Asia could offer exciting new opportunities for British businesses.
If the pound weakens and the UK economy is performing poorly, exporting to booming new export markets like Asia could be a key way for businesses to stimulate growth – and a weaker pound will mean UK exports become much more competitive.
Deal or no deal?
In reality, the difference between the UK leaving the EU with a deal or without one is unlikely to make a huge difference, in the long term. But in the short-term, leaving with a deal in place will make for much calmer waters for those businesses who already export to the EU.
One of the biggest problems of leaving the EU with ‘no deal’ is that this means no 21-month transition period. This period, agreed by May and Brussels, was designed to ease the exit process for businesses. If no deal is reached businesses will instead find themselves having to immediately adapt to new trading relationships.
By Siddharth Shankar
About the author
Siddharth Shankar is a leading expert in trading with Asia and CEO of Tails Trading, an innovative new solution helping UK SMEs to export their goods to Asia. Visit www.tailstrading.com to find out more.
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