EU To Remain UK’s Top Trading Partner
The results of a British Chambers of Commerce survey, conducted in partnership with DHL, found that over the next three years, the top two markets which most businesses plan to start or continue exporting to be Western Europe (44 per cent), and Central and Eastern Europe (32 per cent). What’s more, Western Europe (36 per cent) is also the market which most firms plan to import from.
The results of the survey, based on the responses of over 1,300 businesses, underline the importance of the UK and EU ironing out the post-Brexit trade confusions, to prevent any international trade barriers going forward.
The importance of currency exchange post-Brexit
The report reveals that both British and European businesses will be keeping a close eye on the currency exchange market over the coming months.
In the wake of June 2016’s Brexit vote outcome, pound Sterling (GBP) values slumped against most major currencies.
The British pound (GBP) plummeted 9 per cent versus the US dollar (USD) the day after the surprise result, and 7 per cent against the pound to euro (EUR). This was the biggest fall in the British pound (GBP) for over 30 years. While in recent months the British pound (GBP) has shown signs of improvements, its value still remains well below what it was worth prior to the referendum, which was around EUR 1.30.
Unsurprisingly, this is a situation that businesses in the UK and on the Continent are monitoring closely. The British Chamber of Commerce survey found that 36 per cent of exporters’ strategies over the next three years will primarily be influenced by currency exchange. The only factor deemed more important was demand from overseas buyers (48 per cent).
Likewise, 41 per cent of businesses looking to import say they will primarily be influenced by exchange rates. Only worries over a lack of suppliers in the UK was of more concern to potential importers (43 per cent).
“The devaluation in Sterling over past months has been a double-edged sword, providing a welcome boost for some exporters, but a drag on many other firms, who report higher costs for their inputs and components,” explains Dr Adam Marshall, Director General of the British Chambers of Commerce.
“While UK firms would like to be able to source inputs on the domestic market, our evidence suggests that swapping imports for domestic supplies isn’t presently an option for many. If businesses can’t find or afford to source their supplies domestically, easy and quick access to foreign markets is crucial.”
At a time of such global uncertainties in the exchange rate market, it is of little surprise that so many businesses are turning to currency exchange specialists, such as Halo Financial, for guidance and support..
Foreign exchange specialists like Halo offer businesses major advantages over other currency exchange options. Not only does it tend to be a cheaper option for the business, but foreign exchange specialists offer certain tools which can protect businesses against the risk of subsequent exchange rate movements. For example, they may provide ‘forward contracts’, which enable a business to secure a prevailing exchange rate for up to two years in advance.
The UK still a good place to do business
Perhaps surprisingly, given the negative forecasts that have surrounded the post-Brexit period, the UK is still seen as a good place to do business.
There is little doubt that a number of UK companies are holding off on investments to see how Brexit affects trade relations in the long-term. Yet many experts still view Britain’s business climate as attractive.
The UK topped Forbes’ Best Countries for Business during its 2018 survey. The report noted that while uncertainty prevails, the country’s economy hasn’t been hit as hard as some may believe.
In fact, the UK ranked in the top 25 countries (out of 153 measured) in 14 of the 15-metrics tracked by the Forbes survey. The only metric in which it didn’t make the top 25 was political uncertainty (where the UK ranked 28th).
The future for the UK-EU trading relationship
While the Forbes report was a welcome boost for those who predicted an economic meltdown in the immediate wake of the Brexit vote, the future may not stay rosy for long.
The main challenge post-Brexit will be the UK’s ability to attract new business talent from the EU. The beginning of 2021 has seen multiple EU businesses cancelling shipping to the UK and vice versa as a result of trading barriers. If businesses can’t employ the best talent, or have to cut through too much red tape to do so, then it may be that more attractive options remain elsewhere.
“Businesses need clarity on the practicalities of the future trading relationship between the UK and EU without delay,” says Dr Marshall. “High tariffs, cumbersome customs procedures, as well as conflicting regulatory requirements, can deter firms from trading overseas”.
It’s hoped that trading confidence between the UK and EU will grow over the coming months as businesses are able to make sense of any additional VAT and import duties, as well as extra information required by customs.
As it stands, the UK is only three weeks into post-Brexit transition period and many businesses will need time to adapt to the new economic and political climate.