The cost of doing business both domestically and internationally has risen over the last couple of years due to the after-effects of the pandemic, Brexit and the impact of the war on Ukraine.
Inflation hit a 30-year high in January 2022, before Putin’s invasion began in February, and has been further fueled by the effects of sanctions and the energy crisis. SMEs in particular have been exposed, with a survey of small businesses in November by Novuna Business Finance finding that 92% of respondents were concerned about the impact of the cost-of-living crisis on their companies.
The war and the pandemic have undoubtedly disrupted trade flows globally too, with the WTO forecasting a significant slowdown in global trade growth in 2023. With UK businesses having to adjust to new rules and administrative requirements to continue trading with the EU – the country’s largest trading partner – the outlook looks difficult for British traders.
How to cope
Throughout this difficult period for business, the Institute of Export & International Trade’s (IOE&IT) director general, Marco Forgione, has remained adamant that businesses that trade internationally are more efficient, sustainable and profitable.
Samantha Hodgkins, a customs consultant at the IOE&IT, agrees with the sentiment, while pointing out that there are new costs for trading internationally following Brexit, particularly around the administration of new documentary requirements such as customs declarations. These costs are manageable though, she explains:
“Exporting definitely helps companies to find new customers, increase their sales and spread risk, but businesses need to do it compliantly. If you do not comply with new EU controls – including the requirement to submit declarations – then you risk your goods being held up at a port causing delays, as well as the potential to receive fines and other penalties.
“Although compliance can come with a cost – because customs compliance requires expertise, time and effort – businesses should view it as an investment. There are new costs as a result of Brexit, but these costs have always been there for trade with non-EU markets, so they are not insurmountable.”
Managing new requirements
Hodgkins will be appearing on a free IOE&IT webinar on Tuesday 24 January 2023 about how businesses can manage the costs of international trade. She says that attendees will have the opportunity to hear about some of the authorisations and procedures provided by HMRC to help businesses manage new post-Brexit requirements.
“Authorisations like the simplified declarations procedures, inward and outward processing, and authorised economic operator (AEO) status help companies to better manage their administrative requirements and duty liabilities. Businesses should definitely sign up to Tuesday’s webinar to find out more about how these work and their benefits.”
Not all bad
There are also causes for cheer in the international trade arena. Sea freight rates, which soared during the Covid lockdowns, are starting to stabile and reach pre-pandemic levels. Inflation began to slow in December and is forecast to reduce across 2023, while the UK economy has so far avoided an anticipated recession.
And despite gloomy forecasts in recent months, economists are largely of the view that the UK remains a good place for doing business with a strong basis for future growth. A poll by PricewaterhouseCoopers, published today, found that the UK is the third most important country for chief executives looking to expand their business, in large part due to the country’s underlying business conditions and the strength of key sectors including technology.
Grace Thompson, a public affairs adviser at the IOE&IT who will also be speaking on next week’s webinar, says it is important to be aware of the political and economic context of any era in order to fully appreciate the risks and opportunities to businesses.
“We’re in the middle of a difficult economic and geopolitical period, there’s no doubt about it, but it is important that we work together to face the challenges of any era and also seek out the opportunities.
“The IOE&IT’s chairman, Terry Scuoler, recently said that businesses always need to be prepared to take risks, and there is an extent to which investing in international trade at this time is a risk. But the potential rewards are significant – you can grow your sales and reach new customers by trading internationally.
“On Tuesday’s webinar I’m looking forward to laying out the current political and international backdrop to the state of international trade, with colleagues also on hand to highlight how any added costs incurred through this backdrop can be managed. We hope that this will give your company the insights needed to manage your risk and exposure, giving you a surer footing to grow.”
You can sign up to Tuesday’s webinar, ‘Managing the cost of international trade in 2023’, for free here. It will begin at 11am and last for 45 minutes.
You are invited to ask questions when registering.