UK firms look beyond Europe in post-Brexit world

Almost a fifth of UK companies have developed new markets outside the European Union because of continuing uncertainty over any post-Brexit deal with the bloc, according to a new report.

David Sapsted

8 December 2020

Some 18 per cent of British businesses have have found new, global trading partners to divert business outside the EU, according to the report, 'A New World for Global British Business', prepared by Lloyds Bank and Aston Business School. The report said that an estimated £50 billion of exports have been diverted since the Brexit referendum result in June 2016 as trade relationships have been developed with emerging markets, especially in the BRICS countries – Brazil, Russia, India, China and South Africa.Companies have also diverted trade to traditional trading partners such as Australia and New Zealand.An analysis by Aston Business School of 340,000 quarterly export transactions made by 26,000 UK exporters over a five-year period, found that relative growth in export values towards the EU countries decreased by an average of 8.7 per cent per year.Gwynne Master, global head of trade for Lloyds Bank, said: “While the clock is counting down to the end of the UK’s post-EU transition period, British businesses are building toward the future and forging new opportunities around the world.“These findings are the start of a new chapter in the story of global British business and trade. This year in particular, our business customers have faced a myriad of challenges not least of which is the global pandemic.“Despite this businesses are taking big strategic steps that will change the shape of their import and export business and the future of this great trading nation for years and decades to come.”The biggest shifts in trade diversion were by UK businesses currently exporting the least, but which have now switched as much as 46 per cent of new export growth to non-EU markets.Jun Du, professor of economics at Aston Business School and director of the Lloyds Banking Group Centre for Business Prosperity, said: “The shift in diversion we found goes against conventional ‘trade gravity’ models, in which countries geographically close to each other tend to do more trade. Instead from the referendum through to today we see exporters exploring new trading partners around the world."Our concern lies with the vulnerabilities faced by businesses that export less, forging these paths while lacking the infrastructure and scale of multinational firms as this reverse in trade gravity typically means higher costs and greater risk exposure. More needs to be done to help British businesses of all sizes navigate the future of international trade.”The report concluded: "While evidence suggests trade diversion is already underway and British businesses are preparing for the unknown, insights from key business leaders tell us that there are still many key lessons to be learned."Mitigating risks, managing overseas expansion and building understanding and awareness are all central to the success of opening up new trading opportunities beyond the EU in our post-Brexit world."