How Has Brexit Impacted British International Trade
‘Made in Britain’ labels and British retailers are often seen as a stamp of quality overseas. Trendy fashion brands, chocolates and quality vehicles, British goods have seen a rise in international consumers over the years. However, it seems that the new Brexit trading rules could impact the success of British brands overseas in 2021.
In the UK, ‘Made in Britain’ has long been seen as a selling point. It proves products are locally made and suggests that by purchasing, buyers will be helping to support their local economy.
However, research conducted by postal delivery company Whistl, reveals oversea consumers are also keen on British-made goods. According to the company’s research, international shoppers were 68 per cent more likely to make a purchase if a product was made in the UK pre-Brexit. The report’s findings also revealed that 95 per cent of foreign shoppers believe that a ‘Made in Britain’ marque on goods positively influences their decision to buy.
Why is the appeal of ‘Made in Britain’ to international buyers?
- Good design – the quality of design in the UK is highly regarded
- Provenance – an interesting story to tell
- Well-known, well-respected quintessentially “British” brands
The sectors where there are particular opportunities for UK exporters are:
- Education and Training – high-quality operators and technology
- Healthcare – increasing populations and treatment trends; medical tourism
- Energy – a focus on new and niche technologies and productivity; solar energy
- Defence and security – wider regional concerns, e.g. Middle East, a catalyst for large spends
- Consumer – a fondness for international brands, design and provenance
A wide range of brands are considered ‘particularly’ British. The three most instantly recognisable brands were found to be Burberry, Cadburys and Rolls Royce.
In analysing the most searched for British brands across selected international markets, one sector dominates the results: Fashion.
Fashion is by far and away from the top commodity for overseas shoppers. As Seen on Screen (ASOS) was the most searched for the British brand in five of the six countries examined. Only in China was ASOS not the most searched for British brand, with Burberry and Next proving more popular.
Only seven brands made up the top five searches in the six countries studied (Australia, China, France, Germany, Spain and the United States). Aside from the three already mentioned, Topshop, M&S and New Look were also consistently popular, while PrettyLittleThing crept into the USA and Australian top searches.
Unsurprisingly, British goods are particularly popular with British expats. One in three admit to regularly having loved ones ship them goods that may not be available in their adopted ‘home’ country.
What’s more, Whistl’s research found that two-thirds of Brits abroad are happy to spend extra on having home-grown products shipped to them. Expats were willing to pay, on average, up to 10 per cent more for some home comforts.
The desire for British-made goods seems to be particularly strong among younger expats. Under 35s are actually prepared to spend double the amount compared to retirees to get their home comforts shipped over.
British international trade and Post-Brexit uncertainty
Whistl’s promising findings look to be threatened by the new Brexit trading rules which came into effect on 1st January 2021. Many British retailers are growing increasingly frustrated regarding the lack of clarity on their future when it comes to trading overseas.
Multiple UK firms have temporarily banned overseas deliveries as a result of confusion over the new Brexit trading rules. Some of the British companies include ASOS, Debenhams, John Lewis and Fortnum and Mason.
Some of the obstacles of UK businesses trading with the EU include customs duty charges and the rule of origin. The rule of origin is impacting business which import goods from countries such as China and then resell to EU countries as they are now subject to VAT and import duties
Given that the UK is still very early within the post-Brexit period, it is hoped that businesses can soon readjust to the new trading rules to limit the financial impact of the current lack of cross-border sales.
The declining value of the British pound (GBP) has already prompted many British retailers to ramp-up their prices.
Pound Sterling (GBP) has fallen by around five per cent against the US Dollar since the EU Referendum was held. This depreciation has increased pressures on retailers to raise prices as the costs of raw materials have risen.
Goods have risen at the fastest rate for five years, according to the Consumer Price Index. However, wage increases are only just managing to surpass inflation, at 2.5% compared to 2.4% growth in inflation; in fact, there has been a slowing of wage growth, putting pressure on UK consumers, alongside rising energy costs from soaring crude oil prices.
British retailers are becoming increasingly aware that raising prices may not be the answer to their problems. After all, there’s no point in making goods expensive if the average consumers simply doesn’t have enough money to buy.
These price changes could lead retailers to become more reliant on expanding into overseas market. Daniel Rubin, founder and executive chairman of London-based shoe retailer, Dune, told CNBC that his company is looking to prioritise other investment areas, rather than increase prices. He revealed that his company’s strategy is investing in e-commerce and looking at expanding into international markets. “The most exciting growth area is international,” Rubin stated. The Middle East, India and Southeast Asia were three markets he believes offer plenty of potential. Many other companies are almost certainly thinking along the same lines.
While British retailers are undoubtedly facing trading uncertainty, it’s not all necessarily bad news. The fact that ‘Made in Britain’ continues to be a badge that influences consumers from the wider world to make a purchase is sure to be encouraging for many businesses, especially those looking to expand overseas post-Brexit.
With some market research into target countries, including pricing, the impact of currency conversion, shipping and returns, opportunities exist for British brands to take their businesses in a new direction.
If you’re a British business looking to expand overseas post-Brexit, contact Halo Financial today to see how we can help you take advantage of the current market with any currency-based aspects of your business.
The Department for International Trade (DiT) can provide advice and guidance for British brands considering trading overseas. Your Halo Currency Consultant would be happy to make an introduction, or visit www.great.gov.uk