With the Brexit debate still showing no signs of reaching a conclusion, it could be time to see what coming out of the EU could mean for British businesses.
While it might be prudent to prepare for disruption, the news might be that the effect could be less than we all might think. The Office for National Statistics (ONS) has reported that British trade with the EU has now fallen significantly. But what does this say about our trade links with the EU?
The EU is declining in importance
The EU is the world’s biggest economy – possibly. The combined GDP of its members overtook the US back in 2003. But its actual share of the global economy has been declining dramatically. In the last 20 years, its share of global GDP has dropped because growth in non-EU economies has outpaced it, with China being on track to become number one – and, in fact, may already be the biggest economy in the world.
The EU remains a major market and a vital trading partner. But it could be that the real opportunities are now elsewhere in the world.
Certainly, British dependency on EU trade is falling and is now at a record low. In the past, the EU countries were the main focus of international business. The proportion of UK exports destined for the EU has dropped from 54.8% back in 1999 to 44.6% in 2014. 43% of the UK’s exports in 2016 went to other EU countries.
The figures suggest that less developed economies are enjoying faster growth and are catching up and represent a growing market for UK exporters in future. What’s more, the balance of trade with the EU looks even less attractive when the figures are examined more closely.
The UK had an overall trade deficit of £67 billion with the EU in 2017. There was a surplus of £28 billion on trade in services – but this was outweighed by a deficit of £95 billion in goods.
At the same time, the UK had a trade surplus of £41 billion with non-EU countries.
Naturally, as a small island state, the UK will need to import raw materials and supplies of all kinds, from foodstuffs to petrochemicals. But the services sector, which includes financial services and everything from legal, accounting, advertising, research and development, architectural and engineering to technical services, generates a surplus.
There is a deficit in trade with the EU, and the deficit is getting bigger over time, doubling from £41bn to £82bn between 2012 and 2016.
The UK is growing in international trade
At the same time, the UK’s trading performance with the rest of the world has seen better growth. Exports and imports were broadly in balance from 1999 to 2011 but since 2012 there has been a fivefold increase in the surplus from £8bn to £39bn.
Figures for the last year are not yet available but, with a falling pound, UK exports of both goods and services are looking even better value for overseas customers than ever.
It looks as though a steady decline in trade with the EU is starting to be met with an increased market for UK goods and services in the rest of the world. But what does this mean for UK businesses?
The answer would seem to be new financial needs. Funding a deal presents some additional challenges when your customer is on the other side of the world. Funding exports to uncertain markets, the costs of shipping and the inevitable delays in payment all mean that it can be unwise to start trading overseas without some expert support.
However, the simple truth is that, as a leader in international trade for centuries, the UK has developed an exceptionally wide range of funding solutions. The proper use of these can make it relatively simple and risk-free for any UK company to do business on the international stage.
Business funding experts Rangewell have some detailed information on international markets. They report an increase in enquiries from businesses looking at international markets and can call on a range of funding solutions specifically for the sector.