As we approach the end of what has been another productive year here at the Institute of Export & International Trade (IOE&IT), now is the perfect moment to stop and reflect on events and developments this year and to also look ahead to what 2023 might hold.
The war in Ukraine
This year started with the outbreak of war in Europe. There was a sense something was going to happen in Ukraine, but few expected the tanks to roll across the border when they did. As well as the human tragedy, this also caused incredible economic ructions across Europe. And we’re still feeling the consequences, in higher costs for fuel and the impact this has on businesses and individuals. Although Europe and the UK should get through this winter with regards to fuel reserves, the challenge will be how we refill to get through next winter. The implications of what happened in February will be felt long into 2023 and 2024, not least for the people and communities in Ukraine
That affects everyone. The entire supply chain, and every business, will feel the impact. It means inflation is still going to be a challenge. We've seen it hit 40-year highs in recent months and, although it has come down slightly, it will remain an issue for some time yet.
But supply chain disruptions this year have been different to those of 2020 and 2021. If you look at the charts for the cost of containers, when the Covid disruption hit, prices shot up at an incredibly steep rate. Now those same prices are falling at an even sharper rate. That indicates a lack of demand, which means the global economy is going to continue to be constrained, a view shared by WTO Director General, Dr Ngozi.
Trade is the hope
It is widely believed that UK will go in to recession, the hope is this will be shallow and short, but there is no guarantee that will be the case. Dr Ngozi a few months ago shared the WTO’s view that world trade will continue to be depressed for several years. So, at the macro level headwinds are going to continue through 2023.
The conscious decoupling taking place between the US and China has significant implications for the UK, the EU and the wider international community. This shift in global relations will shape trading relationships in ways which can’t yet be defined with any certainty . The UK’s status as an independent trading nation, creates an opportunity carve out an important role as an interlocutor between key trading blocks and nations.
Building closer relationships with Asia Pacific is a key facet of this independence. with accession to CPTPP and ongoing free trade agreement (FTA) conversations with India. Those discussions may reach a positive conclusion in the earlyish part of next
year. And there are also state-by-state MOU's being signed in the US, which are also positive. The challenge now for the UK government is to get businesses using these FTAs and MOUs.
Climate must remain front of mind
The energy crisis has brought renewed focus on energy security. The government must invest now. Whether it chooses carbon-based fuels or renewables is a call for politicians. But investment is required to secure energy supplies and allow people to heat their homes. This should be a priority. We took our eye off the ball and became too reliant on nations we don't want to rely upon.
There is a view, which I don't share, that we should just trade less. Fewer things being traded between nations would be good, goes this argument. I counter this with the fact that if we are to tackle health inequality and exclusion from education, if we are genuinely going to transform lives, communities and nations, the only way to do it is through greater trade between nations and communities. And you can do that sustainably. The quickest and most effective way to tackle environmental degradation and increase sustainability is by lifting people out of poverty.
The look ahead
In 2023 we will begin to see a transformation in the UK, with the adoption of digitally based trade systems and processes. That will be driven in part by business and in part by government. The Digital Trade Documents Bill is progressing at the moment and then there is the Single Trade Window, which will be launched in November and the Target Operating Model to be announced in the early part of the year. All of which is positive.
But things haven’t been as smooth as we would hope, the move from Chief to CDS has been delayed, as was the Target Operating Model. There have been hurdles. Some of that could be down to the instability in government over the second-half of this year. Three prime ministers and endless trade ministers in a single year has certainly not been helpful.
The key message I get from members and businesses is that they need some stability, and a sense of what the policies, rules and regulations are going to be. Then they can get on with it. All the constant chopping and changing is no good for anybody.
From our recent conversations and interactions with the Secretary of State, her Ministerial team and the wider DIT team, it’s clear they are committed and focused on making a difference and helping more UK businesses trade internationally. The announcement from Kemi Badenock that the focus will shift to get utilisation of FTAs sorted, rather than signing lots of new deals, is to be welcomed. We've not been good enough at getting businesses to seize the opportunities that flow from FTAs.
I also have a sense, from recent conversations that there is a more conciliatory tone with regards relations between us and the EU. I'm hopeful that through the course of 2023, we’ll see more collaborative engagement between the EU and the UK than was the case.
A pivotal year for IOE&IT
This has been a transformational year for IOE&IT. It is clear that the Institute is now internationally respected for our expertise, knowledge, and insight. The Institute now has the confidence and talent to play a leading role in defining policy, providing advice, guidance, support, and services for businesses to help them trade, governments to develop approaches to trade policy, and multi-national organisations to set the context for trade in addressing pan-national issues such as women in trade.
We were asked to run the only Ecosystem of Trust pilot between Africa and the UK and are involved in a number of other Ecosystem of Trust pilots. We have been giving advice and guidance to key Government Departments including Cabinet Office, DIT, Defra and HMRC. Our work and impact extends across the UK’s Nations and regions and on the international stage.
This year IOE&IT profile has grown dramatically. The transformation we started nearly three years ago has started to show incredible results. For 85 years we have been a professional institute representing our members. Now we’re developing a dynamic, respected leader on the global stage.
Our member conference this year was an outstanding success. To attract so many members and have such a vibrant community come together in a really energized way was remarkable. And graduation this year was record breaking, with students from overseas representing showcasing our international reach.
I’m delighted with the confidence we now have. I don't think international trade has ever been more important or so much in the frontline of conversations and discussions. As a result, there is a focus on what IOE&IT can do and what it brings to nations, businesses and individuals.
Accentuating the positive
There is huge cause for optimism. We know businesses trading internationally are more resilient, employ more people and are more innovative and profitable. When we surveyed members recently, 54% were positive with regards to their expectations for growth next year. That compares with a general survey of UK businesses, where just 18% are positive for next year.
It shouldn’t come as any surprise that businesses and organisations which collaborate with us and that we support are more optimistic about next year than those with whom we don’t work. This team is peerless. There are no equals to what we have at the IOE&IT, it is our history, our approach, it’s in our DNA. I'm hugely optimistic for our members, the wider trading community, and for what we will achieve.
As we look forward to 2023, with the potential of this group of people, this team, there should be no limit to our ambitions.
In the meantime, it just remains to wish you all a restful Christmas and best wishes for a joy filled new year. I look forward to collaborating with you next year as together we create the new, exciting chapter in the Institute’s history.