Taking your business further: how international trade offers a way out of the coronavirus crisis

New Santander research shows that while the performance of UK businesses has been hit hard by the coronavirus pandemic, many remain optimistic about their ability to grow.

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Santander’s fourth annual Trade Barometer report also reveals that many businesses believe increased international trade offers an opportunity to mitigate the impacts of the crisis.

Stepping back to leap forward

The report shows that less than a third of UK businesses (32%) say their performance has improved over the past 12 months - the lowest number since this research began in 2017.

Many businesses are therefore battening down the hatches. Just 36% expect to hire new staff over the next 12 months, while only 39% intend to invest in product development. These figures have fallen from 50% and 42% respectively from the spring. 71% say coronavirus is likely to have a negative impact over the next year.

Nevertheless, the Trade Barometer data suggests large numbers of UK businesses are determined to press ahead with their plans for growth – and that many see international expansion as a key priority. The number of businesses that regard international markets as more important as a result of coronavirus is more than five times higher than the number who say overseas trade has become less imperative.

Among businesses that currently trade only in the UK, but have aspirations to begin exporting, 55% say the pandemic has increased the importance of international markets. Almost nine in ten businesses (87%) remain committed to their existing international markets despite coronavirus.

Significantly, confidence in future growth is higher among businesses that already trade internationally or who are about to do so for the first time. 59% of the former group and 66% of the latter expect to expand in the next three years, compared with just 53% of firms that operate solely in the UK.

 

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Adapt to survive

The coronavirus pandemic has also prompted firms to reconsider their business models and their operations. A third (33%) see digital transformation as a key business opportunity stemming from the pandemic – reflecting, in part, the remarkable growth in ecommerce during the crisis. More than a quarter (27%) say they’re rethinking their supply chains, with coronavirus having exposed the dangers of relying too heavily on a small number of markets or suppliers.

In order to take advantage of international opportunities, businesses will need greater certainty about the future shape of regulation, as regulatory changes post-Brexit is currently the most common operational challenge for international businesses, cited by 40% of international companies. The Trade Barometer warns that Brexit anxieties remain elevated, as well as highlighting a broad range of other concerns.

However, despite these concerns, some businesses believe Brexit can be a launching point for increased international trade, with 21% and 35% of firms respectively saying it has become easier to win business inside the European Union (EU) and outside the bloc since the 2016 referendum. These figures have increased since the spring.

However, 40% of businesses in the Trade Barometer pick out regulatory change post Brexit as a key operational challenge for international trade. This is more than any other obstacle. And with concern growing about the ability of the UK and the EU to forge a free trade agreement, the outlook beyond the post Brexit transition period, which ends on 31 December, looks uncertain.

Confidence in overseas markets

Still, it’s important to recognise that many businesses remain enthusiastic about their prospects of increasing overseas sales, both in the EU and globally. Indeed, Trade Barometer businesses pick out the EU as the market which offers the greatest potential for growth over the next year, followed by North America, Europe (non-EU), Oceania and the Middle East. On an individual country basis, the US remains at the top of the list of markets considered to be offering the best growth prospects, followed by Germany, Australia, France and China.

It’s also clear that businesses that have yet to begin trading in overseas markets are increasingly keen to do so. Almost a fifth of domestic-only businesses (17%) are now considering international expansion. This is the highest level seen in any edition of the Trade Barometer research since its launch in 2017.

Supporting each of these businesses – both domestic only firms and those already trading overseas – must now be a crucial priority for policymakers and third parties, such as banking partners. The Trade Barometer has shown us that businesses needs practical support with identifying new markets and customers, navigating complex bureaucracy and facilitating their international trade. The challenges of coronavirus, including the difficulty of overseas travel and face-to-face meetings, add an extra dimension to the support that’s now needed.

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