No such thing as a Bad Brexit - just the wrong clothes

Created: 16 March 2018

London seems to be preparing for Brexit the way it plans for snow. Wait for it to happen, then cancel everything and wonder why nobody was ready.

Those from sturdier parts of the country say there is no such thing as bad weather - just the wrong clothes. We should apply these principles to Brexit. We know events are going to happen, and we don’t know when, or how, or where. But we can at least get some sensible foundations in place. 

IOE&IT Business Member, The Tate Group, has provided us with some tips for surviving market conditions.

 

Don’t get lost in the blizzard of mixed media messages

In the blizzard conditions caused by the gathering Brexit media storm it has become very hard to tell the wood from the trees. It often seems like emotions, rather than facts, are the main currency of mainstream news organisations. It’s no longer enough to report, they now want to interpret events. Encouraging export figures are always tempered with the reminder that this is happening ‘despite Brexit’.

At Tate’s Export Guide we don’t make these judgements. We just concentrate on facts and let you decide what it all means.

Our mission is to provide you the details you need to know about everything from consulates to corruptibility to cargo insurance. We bring you the boring but essential intelligence. We’ll leave the flights of fancy to Newsnight where the ‘experts’ often get their EU terms confused.

There’s no middle ground in the media. We’re either sleep walking into isolation or embracing a brave new world. Our advice is to stick to the facts.

Get your paperwork ready for the money lenders - any papers will do

Global corporations can afford to have their ducks in a row by the time Brexit materialises, says corporate banking veteran Ben Martin, founder of Brexit Tracker. But you can emulate them by spending wisely.

Corporations have the advantage of a budget for risk analysis. This is outside the capacity of most importers or exporters. Unless you can afford to pay PWC £2000 a day per consultant, for a number of weeks. But you do need to compile a comprehensive list of all the variables that affect your business, then apply complex mathematical models to simulate the various outcomes.

The money markets dislike uncertainty and venture capitalists are loathed to lend money to companies that don’t obviate risk and display due diligence to their partners in planning for the unknown. 

A food importer from Leicester, for example, won’t be able to calculate in advance the various options that they may be forced to choose from. So strategists cannot pre-plan their responses. They are less likely to be certain, for example, how shifts in wages and exchange rates and tariffs are likely to affect them if international trading condition X, Y or Z is imposed on them.

So they will have to wait until events unfold and embark on day 1 of their research into a response. 

Brexit Tracker is an online service that aims to make risk analysis affordable. We can’t guarantee its predictions, but it can buy peace of mind for your investors. If financiers can see you have analysed risk and shown due diligence, they are far more likely to fund your survival strategy.

“Anyone who does not prepare to have a Brexit strategy will find it difficult to get funding,” says Martin.

 

Dare to be dull

Brexit will be the least of the problems for many SMEs, says Guy Shone, CEO of researcher Explain The Market

“Our research team says business owners up and down the country are concerned about Brexit but it’s not the top concern,” says Shone. Cyber-security, winning new customers, getting investment to grow and launching into new markets are all more important.

“It’s a long time since the referendum result and the UK is still in campaigning mode,” says Shone. 

So stick to your core activities and outsource the legislation regulation to experts - such as Tate’s Export Guide - who can provide you with the precise details you need to solve each problem. As it happens. It’s worth paying an expert to cut to the chase because it’s expensive studying to be a legislation expert. 

Get Your Story Straight Then Stick to it

Don’t be panicked into making rash decisions based on crowd anxiety. 

What’s good for you might not be good for the economy “What exporters want or need isn't necessarily what is best for the economy as a whole or what is most conducive to free trade,” says Laragh Widdess, at the Institute of Free Trade. 

For instance, exporters who export mainly to the EU need the future UK-EU relationship to be as similar as possible to EU membership in order to avoid losses. So in their case they want something like EEA membership (the "Norway" option), which would of course rule out the ability to change our trade relationships with third countries. 

On the other hand, exporters who mainly sell in non-EU markets would welcome a looser trading relationship with the EU if it means being able to strike trade deals with non-EU countries that could make their trade into those countries easier and cheaper. 

The extent to which exporting businesses use foreign imports in their processes and where those foreign imports come from will also affect what they need from Brexit. This will differ widely between, say, a business whose inputs mainly come from the EU and a business whose inputs mainly come from outside the EU. So advice needs to be tailored to your circumstances, which is what Tate’s Export Guide’s experts can do. 

Keep up with trade news - but only the bits you need to know

Once new trading arrangements are in place, it’s imperative that government out-reach to exporters is extensive, to help them understand the new arrangements. For example training in new customs procedures or rules of origin paperwork. 

“If and when we do trade deals with third countries, government must follow up on those with exporters in a similar way, explaining what the new arrangements are and what procedures must be followed in order to benefit from them,” says Widdess.

Are you confident that they will? Neither are we!

Many exporters don’t use preferential tariff rates afforded by trade deals because they don't know how to adhere to rules of origin requirements, warns Widdess.

“The UK will have to play a major catch-up game to the EU where proliferated trade negotiations are concerned after Brexit. Maybe it will be able to do them faster but the EU has a hell of a head start,” says Allie Renison, head of Europe and Trade Policy at the Institute of Directors. 

So everything is going to move very fast. 

If you tap into Tate’s Export Guide’s experts you can make sure you are one of the exporters getting the full preferential rates.

Trading with China: Special Report

Created: 12 May 2017

Brexit has created an unprecedented interest in trading with the world’s most powerfully emerging market. In April upwards of 400 delegates from all sections of the Sino-British accord convened in Westminster to hear how they can work together more effectively. 

The event, organised by the China-Britain Business Council (CBBC), aimed to inform British traders on how to address the Chinese market, examined the attractiveness of the UK for Chinese investment and explored marketing trends.

Speaking at the event, CBBC chair Lord Sassoon outlined Chinese Premier Li Keqiang’s vision of a more open Chinese future. “Premier Li has said that China must not protect an outdated domestic service industry,” said Sassoon. In a statement UK Prime Minister Theresa May urged business leaders to help strengthen the UK-China relationship.

The agendas for both nations includes a number of national events for this year as the UK strives to be a freer and more open nation under Brexit.

The prospects for investment capital from China have never been better, Giles Blackburne, Associate Professor at Leeds University, told the conference. His report for CBBC report detailed 21 case studies of UK-China cooperation in 10 countries in 2016. Collectively these projects are worth $21 billion.

“London has always been a centre in raising capital for global projects and will continue to be so,” added Simon Wilde, Senior MD at global investment bank Macquarie. At the event Jiang Sunan, Minister-Counsellor at the Chinese Embassy in London unveiled the 3-step plan that that, he said, will see China “become a world power in science and technology by 2050”.

“More capital was raised in China than  the US in 2016,” said Tom Butterworth, Director of Early Stage Banking at Silicon Valley Bank in the UK. In 2006 three technology firms received Chinese investment in the UK but by 2016 the number of comparable deals was 66.

Meanwhile, more evidence emerged this month that Britain is gearing up for much stronger trade trade links with China. In April Heathrow Airport confirmed that China Southern Airlines will be operating a second daily departure between the UK hub and the Chinese port of Guangzhou with effect from 1 June this year.

The airline’s twice-daily service is the only direct connection between the UK and the southern Chinese city. Tier Two cities, says a report quoted below, are the fastest growing economies in China. The new daily service will boost trade capacity to this booming city, by doubling the space for British exports to up to 8760 metric tonnes a year, says Heathrow Chief Executive John Holland-Kaye.

In 2016, more than 1.1 million passengers used Heathrow to fly to and from Chinese destinations, an increase of 7.3% over the previous year.

Meanwhile, the first UK to China export train left the DP World London Gateway in April, making the inaugural 7500 mile, three-week-long journey, from South Essex to Yiwu in the Zhejiang province in eastern China. Products on board include soft drinks, vitamins, pharmaceuticals and baby products.

Container operator OneTwoThree Logistics is overseeing the transport and booking of cargo for the UK/China rail freight trains, in conjunction with Yiwu Timex Industrial Investment Co, which is running the service with China Railway Container.

The ‘Silk Rail’ service is part of China’s One Belt, One Road programme and is cheaper and less restrictive than air freight and faster than going by sea, according to Greg Hands, Minister of State in the Department for International Trade (DIT). “This shows the huge global demand for quality UK goods and is a great step for DP World’s £1.5 billion London Gateway Port,” said Hands.

There are three major factors to consider before addressing the Chinese market: research, location and communication.

Importers need to be vigilant, a report from the EC has warned. Over half of the dangerous goods imported into the UK came from China, according to the latest results of the EU’s Rapid Alert System consumer protection system.

Despite progress in tackling these dangerous goods China still accounted for 53% of notifications made under the Rapid Alert System in 2016. However, that figure is an improvement on 2016 when 62% of dangerous goods came from there.

Last year, the most notified product categories were: toys (26%); motor vehicles (18%); and clothing, textiles and fashion items (13%). Risk of injury (25%) and from chemicals (23%) were the most notified dangers.

A growing problem is that dangerous products are increasingly sold online. In response, the Commission has stepped up its co-operation with Amazon, eBay and Alibaba, all of which have agreed to increase their efforts to remove notified products from their websites.

Intellectual property (IP) protection is another danger area, since by reputation Chinese companies are not great respecters of copyright. According to global IP consultancy Rouse, this is not the problem it used to be. “There is no reason why you need to have IP nightmares in China,” said Tim Smith, an IP specialist at Rouse and member of the China-Britain Business Council. China has made remarkable progress with regards to intellectual property and an effective IP strategy is now both critical and affordable for companies entering the China market, according to Smith. CBBC now offers a range of IP services including its own specially devised Innovation & Joint R&D in China tool kit.

Choosing the right location is another critical decision. The best known cities such as Shanghai, Beijing and Guangzhou are the major business, government, and industrial centres. However, the fastest growing regions in the Chinese economies are places few British companies will have knowledge of, such as Wuhan, Kunming and Zhuhai. These are just three of the 14 second-tier cities identified by China's National Bureau of Statistics, that are growing the fastest in China’s booming economy. The GDP of these regions are expanding two per cent faster than the national average. Just 8 percent of the country's total population lives in these second tier cities but they represent 19 percent of China’s total GDP.

A driving factor is that the Chinese government is moving its development focus away from the coastal metropolises of Shanghai and Beijing, and directing its investment inland. With $125 billion budgeted to be spent on roads and up to $200 billion on railways, the government is encouraging a mass migration from the countryside to these boom towns. This creates a huge demand for any goods and services that support the process of building out the infrastructure.

Meanwhile, retailers who can meet the rising demand for consumer goods will be well placed.

China has cut back its number of economic development zones and narrowed the attention to 50 areas. That has worked out well for the second tier cities, many of which are in those zones, which means entrepreneurs can enjoy preferential rates on government utilities and land usage and less competition.

Communication is the crucial third pillar of your China trading strategy, according to CBBC. That means adopting the right platform for making connections and finding local partners to really bed your company in to the local trading culture.

Social network Wechat is now part of the fabric of daily life for Chinese people, most of whom were daily active internet users. It’s like a one stop social media stop,  as it incorporates chat rooms, information sharing and online payment functions. This makes it the perfect marketing channel for Chinese customer oriented UK companies and for new entrants to the China market. There are one million financial transactions per minute in Wechat, according to Andrea Ghizzoni, Europe Director of WeChat.

However, it doesn’t operate in a similar way to Western social media - being more laborious in establishing mass audiences, since the Chinese authorities are wary of this. Getting up to speed on WeChat will be a challenge that UK companies need to address.

Toy store Hamley’s, which has made inroads into the Chinese market, could not have achieved this without trusting Chinese partners to take over the reigns locally. Gudjon Reynisson, CEO of Hamleys, says it is vital that companies to have a strong local partner to be a success in China as they bring you network and local knowledge. “As a British brand coming into China, you have to be humble and accept that what’s popular in central London may not work in Nanjing,” says Reynisson. Guidance on logistics, customs and management of stock was indispensable for running his retail business in China.

Everything is being turned upside down and there are huge opportunities in China, says Antoaneta Becker, Director of Food & Drink Sector from CBBC, who has lived there for two decades and knows the changing taste of Chinese consumers.

However, food exporters face a complex, highly regulated market, arriving to Tim Render, Director of Food and Farming of DEFRA. While the UK government is working to build relationships with the Chinese officials to create the best regulatory environment for UK business, export guidance will be vital, he says. Keep watching this space. 

The Tate Group

Our a range of products and services is design help exporters and importers operate effectively within the complex world of International Trade. We assist companies by providing essential skills and knowledge in trade procedures, enabling employees to handle export orders and international product procurement successfully. Our workshops, trade reference, documentation and software applications form a unique suite of 'tried and tested' services. We are associate members of the Institute of Export and British International Freight Association.