Half of UK exporters haven’t changed their trading plans despite reliance on EU states
85% of all UK businesses who export trade with the EU, with 54% saying it's their main foreign market
Half of all UK exporters haven’t changed their trading plans despite their apparent reliance on business from European Union (EU) member states.
A study of 1,000 UK businesses who sell their goods overseas by Lloyds Bank Commercial Banking, has revealed that small firms may need to re-think and update their current trading arrangements, in light of the fact the UK will leave the EU and the single market.
Currently, 85% of all UK businesses who export trade with the EU, with 54% saying it’s their main foreign market – highlighting the reliance many UK firms have on the free trade agreement that is due to expire in less than two years.
Of those that have reviewed their strategies since the historic Brexit referendum in June 2016, 27% said they planned to look further afield to take opportunities outside the EU, with 30% opting to look closer to home and target domestic opportunities instead.
It’s suggested that such a narrow trading outlook could create a greater concentration risk on the UK economy, and thus, expose domestic businesses to UK economic cycles even more.
Looking ahead to life outside the EU, respondents remain fearful of the volatility in exchange rates, with 25% of those who have exported in the last 12 months rating it as their top challenge, closely followed by the potential introduction of trade tariffs (19%).
Even among businesses that currently export to non-EU markets, such as Asia or the Americas, 51% admitted they would be negatively affected if the UK left the EU without a replacement trade deal.
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However, despite some doom and gloom, businesses still expect the their domestic and global rivals to become more competitive over the next five years.
45% of those surveyed, who would seek support or advice if they were to encounter any market access barriers, expect their firm will be more competitive internationally by 2022, compared with just 17% who believe the opposite.
While traditional partners in Europe and in English-speaking regions remain popular destinations for those looking to export, 13% of those who haven’t exported in the last year, but think they might in the future, would like to trade with Japan, and a similar number (12%) want to trade with the Middle East.
Clive Higglesden, head of trade & supply chain product for Lloyds Bank Global Transaction Banking, said:
“With a year since the vote and negotiations to leave the EU now underway, it’s concerning to consider that almost half of British exporters have yet to assess what changes may occur and what action needs to be taken.
“Wait-and-see is not really an adequate strategy for exporters, and businesses should be acting now to manage any risks on the horizon and possibly explore new opportunities.
“However it is comforting to see that a quarter of firms are already looking at new markets beyond the European Union , which is important for ensuring reduced impact from any loss of access to the EU Single Market.
“For companies that have elected to focus on the UK, they need to be conscious that they will be more greatly impacted by UK business cycles. Diversification into new markets is an important way of managing this risk”