Snapshots of global business

 

Exporting remains a key driver of the UK economy, but political turmoil, coupled with Brexit uncertainty, continue to be of major concern to business and particularly those involved in international trade.

British Chambers of Commerce

Speaking at the recent 2019 BCC International Trade Summit, Director General Adam Marshall commented that, whilst some businesses are succeeding and growing in markets worldwide, others are facing challenges.

He said: "Competitiveness and confidence have been sapped, contract and supply chains have been affected, so too has cross-border trade. Uncertainty around Brexit is proving a barrier to growing exports, whilst tariffs and exchange rate fluctuations are also a major hindrance."

He added that businesses are facing more wide-ranging issues, not least a growing, global trend of protectionism.

Results from a recent BCC Quarterly Economic Survey - covering 6,600 UK firms which employ around 1.2 million people - show that the number of manufacturers reporting increased export orders was the lowest in a decade, and this trend was also reflected in the service sector.

Manufacturers reported a significant drop in confidence around turnover and profitability and many say their cash-flow position has deteriorated. Little wonder that few are increasing investment in staff training and development.

The dominant service sector also saw a decrease in firms reporting increased export orders and there was a fall in those stating confidence in turnover and profitability improvements.

A BCC spokesman said: "These findings point to a worrying drop-off in UK economic activity and a notable slowing down in global growth prospects."

 

Department for Business and Trade (DBT)

The UK Perspective

In 2018, the UK ranked 6th in the world for export of goods and services, and 3rd in Europe behind Germany and France.

The value of UK exports was £642.2 billion in 2018, with more recent data showing the value of exports was £655.0 billion in the 12 months ending September 2019.

The relative importance of the EU as an export market has declined over the last decade, so in 2018 the share of exports going to the EU was 45.3 per cent compared to 49.8 per cent in 2008.

In the 12 months to June 2019, the value of exports to the Non-EU was £359.3 billion, up 4.2 per cent on the previous 12 months.

The UK's largest export market in 2018 was the United States, accounting for around a fifth (18.8%) of total UK exports. Germany, Netherlands and France followed at 8.7%, 6.9% and 6.5% respectively.

Ireland, China, Italy, Switzerland, Belgium and Spain completed the top ten UK export markets, in that order.

Attitudes to Exporting:

Around 13 per cent of all UK businesses have not previously exported, but believe they have goods or services which could potentially be exported or developed for export.

Interestingly, 66% of exporters are 'passive' exporters, in that they wait for orders to come in rather than actively target foreign customers. 'Active' exporters who account for around 28% of the total are more likely to report that they are exporting more than a year ago.

The latest forecasts by the Office for Budget Responsibility predict that annual real export growth will be improved in 2019 and 2020, before turning flat in 2021 and declining in 2022-23.

 

PwC

Global growth continues to slow throughout 2019, according to professional services firm PwC.

The mini-boom phase from the end of 2016 to early 2018 is over and growth is expected to moderate to around 2.3 per cent in 2019.

PwC predicts that trade conflicts will deepen throughout the year and this is likely to generate further uncertainty.

The main focus of tension is likely to remain US and China trade, but there will always be the risk of this escalating into a wider trade conflict and businesses accordingly need to plan for different scenarios.

 

Grant Thornton UK LLP

Despite weaker global optimism and increasing trade barriers, technology and growth potential are driving businesses internationally.

This, from business specialists Grant Thornton, whose global leader of network capabilities Francesca Lagerberg comments: "Businesses today are conceived with global ambitions as technology rolls back many of the obstacles that once hindered international growth. While this trend is set to continue, businesses have to deal with a multitude of political and economic factors instead, most recently the US/China trade war and the threat of increased protectionism."

Grant Thornton's latest International Business Report, published in April 2019, throws up some interesting data, with net export expectations for the next 12 months holding up well remaining unchanged at 21%.

These bullish expectations for international activity indicate that the constraints of domestic and existing markets will always prompt businesses to grow: international expansion offers obvious revenue-building opportunities.

As Paz Malubay, head of business processing outsourcing at Grant Thornton Philippines, says: "On one level, by expanding into new markets you are reducing the risk of things not going quite so well in your existing markets. Growing businesses need to go global or find themselves confined."

Advice to existing and potential exporters includes:

  • assess the market and competition to identify genuine opportunities for overseas growth
  • consider practical and administrative implications including manufacturing and distribution, employment and tax law, consulting with specialist advisers where necessary
  • set achievable goals for overseas growth
  • network to find the right people to help you get a better understanding of local business practices and how to integrate into new markets
  • be flexible and be careful not to get stuck in old ways of thinking
 

World Economic Outlook Report

Global growth is described as 'still sluggish', forecast at 3.2 per cent in 2019, picking up to 3.5 per cent in 2020.

GDP releases so far this year, together with generally softening inflation, point to weaker-than-anticipated global activity.

Global trade, intensive in machinery and durables, remains subdued, with the projected upturn in 2020 by no means certain.

The report indicates there is a pressing need to reduce trade and technology tensions to place global growth on a stronger footing. Uncertainty around trade agreements - including between the UK and the EU, and the free trade area encompassing Canada, Mexico and the United States - need to be resolved.

There were some positive surprises to growth in the first half of 2019 in advanced economies, but activity in emerging markets and developing economies was weaker than expected.

Growth was better than expected in the United States and Japan, and whilst first quarter GDP in China was stronger than forecast, indications suggest a weakening of activity for the second quarter.

Elsewhere in emerging Asia, as well as in Latin America, activity has disappointed.

Forecast for advanced economies:

  • in the US 2019 growth is expected to be 2.6 per cent moderating to 1.9 per cent in 2020
  • growth in the euro area is projected at 1.3 per cent in 2019 and 1.6 per cent in 2020
  • the UK is set to expand at 1.3 per cent in 2019 and 1.4 per cent in 2020 - the forecast assumes an orderly Brexit followed by a gradual transition to a new regime
  • Japan's economy is set to grow by 0.9 per cent in 2019, but growth is forecast to dip to 0.4 per cent in 2020

Forecast for emerging markets and developing economies:

  • whilst emerging and developing Asia is expected to grow at 6.2 per cent in 2019-20, Latin America is forecast to grow at just 0.6 per cent this year, increasing to 2.3 per cent in 2020
  • the outlook for emerging and developing Europe is subdued, with growth for 2019 forecast at 1 per cent in 2019, rising to 2.3 per cent in 2020
  • growth in the Middle East, North Africa, Afghanistan, and Pakistan region is expected to be 1 per cent in 2019, rising to about 3.0 per cent in 2020.