2021 proved to be another tumultuous year for business and the uncertainty looks to continue into 2022. Nowhere is this more evident than in international trade – which now touches almost all aspects of business and society. That makes it even more vital for companies to be communicating about their trade priorities, shaping trade policy, and advocating for solutions that ease trade barriers and disruption.
In the UK in particular, the combined effect of the pandemic and Brexit is having a serious impact on the way companies do business. Whilst the COVID-caused lorry driver shortage last year put serious pressure on domestic distribution networks, freight prices remain high albeit somewhat stabilised. Meanwhile, relations with the EU, now under the hawkish remit of Foreign Secretary Liz Truss, remain fragile. It seems highly unlikely we will see any great progress towards better market access with our closest neighbours and trading partners in the foreseeable future.
The UK government continues its pursuit of new free trade agreements, one of the few areas of tangible progress in the post-Brexit environment. The economic benefits of these appear relatively trivial, with forecasts rarely amounting to more than 1% of GDP and spread over long time periods.
Nonetheless, the announcement of trade talks with India and the Gulf Cooperation Council, as well as continued pursuit of accession to the elegantly named Comprehensive and Progressive Agreement for Trans-Pacific Partnership (better referred to by its clunky acronym CPTPP) will be welcomed by many companies. To the UK government’s credit, it continues to exhibit a commitment to free trade and a rules-based international system, despite the self-imposed barriers now in place with the EU.
That said, business leaders do not seem to recognise the UK government’s efforts in this area.
According to FleishmanHillard’s latest report on Tackling International Trade, less than half (48% extremely or very) of businesses are confident in the UK government’s approach to international trade.
Businesses also reported they are eagerly waiting on a UK-US Trade Agreement, most acutely among large businesses (£1bn+ turnover) at 69%, far outstripping India (40%) and the Gulf Cooperation Council (25%). They are likely to be waiting some time, however, given the Biden Administration’s domestic distractions and disdain for the UK government’s actions on the Northern Irish border and broader populist tactics on issues like voter suppression and immigration.
UK businesses also seem to be struggling to adapt to changing trading relationships. According to research from the Department for International Trade a minority of businesses understand changes to trading arrangements with non-EU countries and whether the goods they export are eligible for reduced customs duties.
This is confirmed by research by the National Audit Office which found that nearly one-third of eligible businesses had been unable to exploit the reduced tariffs offered by the UK free trade deal with Japan because they were not aware of the changes.
In the midst of difficult times, there remain opportunities for companies that position themselves for trade growth. But with a government that defies typical policy-making structures, it requires new ways to shape decisions, based on the best geopolitical intelligence, ability to engage government and understanding of how to influence wider business and political networks.
FleishmanHillard’s International Affairs experts, including specialists in International Trade, offer the services and strategic counsel to guide business decision making, bolster reputation in the face of trade uncertainties and provide platforms for better relationships with key stakeholders. As you read the report, get in touch to discuss how we can help you tackle the changing international trade landscape.
Tim Harding, Associate Director, International Affairs