International Export Packers

Dedicated to Simplifying Import / Export

International Export Packers
brexit

Our Office

International Export Packers

Last year did at least see a glimmer of cheer for the UK’s exporters.  Just before it ended, the government announced an extra £18M in COVID19 support, channelled via UK Export Finance (UKEF).  This increases its budget by almost a third.  Of course, just how useful this will be in practice will depend on the state of the global economy.  With that in mind, here are some predictions.

The Brexit trade deal will need time to bed in

In principle, the Brexit trade deal should create a smoother path forward for trade in both directions.  In practice, its benefits are probably going to take some time to manifest.  Firstly, there’s the ongoing disruption caused by COVID19.  Secondly, there is now a need for (significant) extra administration where previously there was none.

Looking on the bright side, however, the COVID19-induced hiatus may provide an opportunity for businesses to get to grips with the practicalities of trading with the EU (and NI) post-Brexit.  In particular, it could allow them a window of opportunity to deal with various admin points they should have covered already but might not have done, e.g. registering for a GB EORI number.

UK-based manufacturing could grow

COVID19 gave a clear lesson in the danger of relying on a single country to be the world’s manufacturing hub.  This raises the question of whether or not companies will change their established practices to avoid a potential repeat of the disruption caused by the pandemic.

Realistically, this is likely to depend on the nature of the product being manufactured.  Essentially, the shorter the lead-time or lifespan of the product, the more compelling the case for operating distributed manufacturing close to the manufacturer’s key customer bases.  The longer the lead-time or lifespan of the product, the more a manufacturer may be prepared to take their chances with China.

This means that there is at least the possibility that the UK could grow its manufacturing sector by picking up contracts which were formerly given to China.  The fact that there is (currently) tariff-free access to the EU market could be helpful here.  If this does happen, it could do a lot to boost the UK’s exports.

The pound will be relatively weak throughout 2021

Right now, the UK’s low-interest rates mean that the pound is likely to be of very little interest to currency traders.  In principle, this could change if the UK saw a rise in inflation.  Theoretically, this would effectively force the Bank of England to raise interest rates.  In practice, it’s hard to see there being a significant rise in inflation.  It’s also hard to see a rise in interest rates.

In fact, even if inflation breaches the Bank of England’s target (of 2% with a 1% margin of error either way), it’s questionable whether the Bank of England would even raise interest rates.  It might, instead, ask the government to update (or waive) the inflation target.  This would, of course, lead to some pain but might be less painful than raising interest rates.

The Bank of England has even hinted that it might be prepared to consider negative interest rates.  At present, it’s unclear just how serious it was about this.  If, however, it did go down that path, there is a strong likelihood that it would weaken the pound.

Global economies will reopen slowly and unevenly

Currently, it looks like the end of winter is largely going to be a write-off for most exporters.  With vaccines and warmer weather both due soon, however, the global economy should be able to get moving again.  It will, however, need some time to get back into smooth running order, e.g. to get sea freight running predictably again.