Exporting British business post-Brexit

In the wake of Brex­it and the Covid-19 pan­dem­ic, exports present a glob­al oppor­tu­ni­ty for British com­pa­nies seek­ing to expand beyond the EU. 

UK busi­ness­es with open growth strate­gies can now ful­ly explore pre­vi­ous­ly untapped inter­na­tion­al mar­kets, though this depends on the government’s suc­cess in strik­ing free trade deals with oth­er coun­tries. Fur­ther progress is essen­tial, build­ing on exist­ing agree­ments like those with Aus­tralia and Japan.  

These deals offer point­ers for the path ahead. The UK-Aus­tralia Free Trade Agree­ment, now agreed in prin­ci­ple, is the first major trade deal nego­ti­at­ed from scratch by the British gov­ern­ment since Brex­it, elim­i­nat­ing tar­iffs on all UK exports. This could be sig­nif­i­cant: the UK’s trade rela­tion­ship with Aus­tralia was worth £13.9bn in 2020 and is set to grow under the new deal. 

Like­wise, the free trade agree­ment with Japan could offer oppor­tu­ni­ties to ambi­tious exporters, going far beyond the exist­ing EU deal, accord­ing to the Depart­ment for Inter­na­tion­al Trade (DIT). The gov­ern­ment esti­mates the agree­ment will increase British trade with Japan by £15.2bn, with UK busi­ness­es ben­e­fit­ing from tar­iff-free trade on 99% of exports to the coun­try.

Addi­tion­al­ly, so-called EU rollover deals, which extend pre-Brex­it arrange­ments, have already been nego­ti­at­ed with more than 60 impor­tant mar­kets, includ­ing Cana­da, Ice­land, Nor­way, Mex­i­co, South Korea, Switzer­land, Turkey and Viet­nam.

But there are big­ger prizes on the hori­zon. The top tar­get is the US, fol­lowed by Chi­na and India, notably in the auto­mo­tive, con­sumer, health­care and tech­nol­o­gy sec­tors. Nego­ti­a­tions with Pres­i­dent Joe Biden’s US admin­is­tra­tion appear to have stalled amid out­stand­ing issues in areas like food safe­ty, ani­mal wel­fare and phar­ma­ceu­ti­cals. Finan­cial ser­vices, invest­ment, ecom­merce and reg­u­la­tion may be among oth­er points of con­tention.

Accord­ing to the DIT, free trade will grow the econ­o­my in every part of the UK and deliv­er jobs, bet­ter liv­ing stan­dards and high­er wages. “As an inde­pen­dent trad­ing nation, we are strik­ing ambi­tious deals to suit our key indus­tries, going fur­ther than before with major part­ners such as Japan and Aus­tralia,” the DIT says.

Challenges and opportunities

Since Brex­it, the UK has aimed to retain and strength­en its glob­al trade links. It has nego­ti­at­ed and sub­mit­ted to the World Trade Orga­ni­za­tion (WTO) cer­ti­fi­ca­tion of its own WTO sched­ules of com­mit­ments on goods, ser­vices and agri­cul­ture, which were pre­vi­ous­ly under the EU.

How­ev­er, there are chal­lenges ahead, with all eyes on the con­tin­u­ing inter­na­tion­al trade nego­ti­a­tions.

With such a range of coun­tries on offer, mak­ing the best choice can seem like a daunt­ing task. 

Com­pa­nies must weigh up issues around geog­ra­phy, cul­ture, con­sumer behav­iour, cost and com­pe­ti­tion, plus legal and tax con­sid­er­a­tions. 

Chris South­worth, sec­re­tary gen­er­al of the UK Inter­na­tion­al Cham­ber of Com­merce, says a company’s export jour­ney starts by iden­ti­fy­ing the mar­ket oppor­tu­ni­ties for its prod­ucts or ser­vices.

“It begins with a strate­gic plan and mar­ket analy­sis of what is required to launch the prod­uct or ser­vice,” he says. “The com­pa­ny has to decide whether to sell through a dis­tri­b­u­tion agent or set up an office on the ground. Help is avail­able through the local British embassy and cham­ber of com­merce.”

The process of decid­ing tar­get loca­tions will dif­fer from busi­ness to busi­ness and from sec­tor to sec­tor, notes Insti­tute of Export & Inter­na­tion­al Trade direc­tor gen­er­al Mar­co For­gione. Busi­ness­es will often know where their com­peti­tors have been suc­cess­ful, or per­haps they’re see­ing unso­licit­ed inquiries from a par­tic­u­lar coun­try. 

It is impor­tant to car­ry out a com­peti­tor analy­sis: who they are, how many there are, their offer, their rel­a­tive strengths, their pric­ing strate­gies. Can you iden­ti­fy a gap that none of the com­peti­tors can fill but you can?

“There are web ana­lyt­ics that busi­ness­es can use which might tell them par­tic­u­lar ter­ri­to­ries and coun­tries where their prod­ucts are being searched. All this data can give a pic­ture of the peo­ple who are look­ing at your prod­uct and might be inter­est­ed in buy­ing it.”

When intro­duc­ing a prod­uct to a new loca­tion, a company’s top pri­or­i­ty is assess­ing the lev­el of demand. They will then need to think very care­ful­ly about the legal frame­work, For­gione says, includ­ing the legal require­ments they must meet and the require­ments expect­ed of them. 

Beyond this, they must con­sid­er the ease of doing busi­ness in the coun­try, he says, “whether that’s think­ing about how far away it is or the lan­guage skills they will need and cul­tur­al issues around doing busi­ness”.

Anoth­er impor­tant aspect, par­tic­u­lar­ly for UK small and medi­um-sized enter­pris­es, is to ensure that their staff are prop­er­ly trained. There are rep­utable cours­es and qual­i­fi­ca­tions avail­able, while pro­fes­sion­al mem­ber­ship bod­ies can also pro­vide oth­er resources, expert help and advice. 

Lat­est export oppor­tu­ni­ties are list­ed on the DIT great.gov.uk web­site, which may pro­vide intro­duc­tions or leads for would-be exporters.

Addi­tion­al­ly, there’s help avail­able through DIT online sup­port, includ­ing vir­tu­al trade mis­sions, export acad­e­mies and trade shows. Small­er busi­ness­es are backed by a gov­ern­ment Inter­na­tion­al­i­sa­tion Fund, while advis­ers are based in every region and are often well-placed to assist busi­ness­es that are think­ing about export­ing.

Beware red tape

As well as polit­i­cal, social, cul­tur­al and infra­struc­ture con­sid­er­a­tions, there may be trade bar­ri­ers through pro­hib­i­tive tar­iffs or quo­tas, not to men­tion bureau­crat­ic red tape, cau­tions Tra­cy Ruff, Busi­ness West Inter­na­tion­al Trade Cen­tre man­ag­er based in Bris­tol.

“It is also impor­tant to car­ry out a com­peti­tor analy­sis: who they are, how many there are, their offer com­pared with your own, their rel­a­tive strengths, pric­ing strate­gies, who the mar­ket lead­ers are and where your com­pa­ny would fit in,” she says. “Can you iden­ti­fy a gap that none of the com­peti­tors can fill but you can?”

It’s impor­tant to also try to under­stand cul­tur­al dif­fer­ences. Japan, for exam­ple, is a coun­try found­ed on tra­di­tion and rela­tion­ships; build­ing strong ties over the longer term is cru­cial to suc­cess. And while coun­tries like Aus­tralia and the US might have a sim­i­lar busi­ness cul­ture to the UK, busi­ness­es shouldn’t assume they’re exact­ly the same sim­ply because they’re Eng­lish-speak­ing coun­tries.  

Turn­ing to par­tic­u­lar exam­ples, Ruff says that exporters look­ing to Aus­tralia must get to grips with the country’s tax­a­tion sys­tem. 

 “You’ll need to con­sid­er things like the super­an­nu­a­tion levy, which requires you to pay towards local employ­ees’ retire­ment. You should also make sure you reg­is­ter at the Aus­tralian Tax­a­tion Office when you incor­po­rate.”

While tar­iffs should be part of the ini­tial mar­ket assess­ment, “the big­ger issue may be non-tar­iff bar­ri­ers”, notes South­worth. These include reg­u­la­tions, rules of ori­gin, quo­tas and large amounts of bureau­cra­cy and paper­work. Deal­ing with fed­er­al coun­tries like the US and Brazil can be dif­fi­cult, because indi­vid­ual states may have their own require­ments.

“Per­haps a big­ger con­sid­er­a­tion is ship­ping costs as these have gone through the roof. A con­tain­er has gone from £2,000 to £10,000-plus,” says South­worth. “Also, dif­fer­ent labelling require­ments may have to be built into fac­to­ry pro­cess­ing, which could add up to quite a lot of mon­ey.”

Step-by-step guide

DIT advis­ers can offer tech­ni­cal infor­ma­tion and help busi­ness­es through a step-by-step guide to export­ing. Expe­ri­enced exporters also act as export cham­pi­ons and share their exper­tise.

Com­pa­nies should check the duties, rules and restric­tions for their goods or ser­vices in the des­ti­na­tion coun­try. They need to apply for any nec­es­sary licences or cer­tifi­cates and must get an EORI (Eco­nom­ic Oper­a­tors Reg­u­la­tion and Iden­ti­fi­ca­tion) num­ber.

There are a num­ber of dec­la­ra­tions nec­es­sary, includ­ing for cus­toms, tem­po­rary stor­age and entry or exit sum­maries. Also, com­pa­nies must reg­is­ter for VAT if their VAT tax­able income exceeds £85,000. They must then check that who­ev­er is receiv­ing the goods or ser­vices can import them, as the importers may need a licence or cer­tifi­cate and to make an import dec­la­ra­tion.

New exporters must decide who will make export dec­la­ra­tions and trans­port prod­ucts; they may decide to hire some­one to deal with cus­toms and move the goods for them.

Final­ly, UK exporters must find the right com­mod­i­ty code to clas­si­fy the exports, pre­pare an invoice and oth­er doc­u­men­ta­tion – licences, cer­tifi­cates and pos­si­bly proof of ori­gin – which must trav­el with the goods.

Com­pa­nies already export­ing beyond the EU before Brex­it will be famil­iar with the var­i­ous require­ments and paper­work, giv­ing them an advan­tage over those start­ing from square one.

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