Political uncertainty is the biggest barrier to trade for UK business

Sage has released the UK findings from a survey of 3,000 businesses in 12 countries, highlighting the impact of political uncertainty on trade and exports.  Entitled We Power the Nation, Sage uncovers how technology and digitisation impacts three success factors at the core of business today; Trade, People and Productivity. 

The first instalment is focused on Trade and reveals that 1 in 4 businesses in the UK have exported products and services in the last year, the lowest rate across all 12 nations.  UK businesses call out political uncertainty, differing product standards and uncertainty around jurisdictional compliance as barriers to invest in international trade. The findings follow the World Economic Outlook report, published by the IMF in April 2019, projecting global growth to slow from 3.6% in 2018, to 3.3% in 2019 – with a contributing factor likely to be the presence of large and rising bilateral trade balances raising concerns.

As a result, many UK businesses are calling on the government to remove trade barriers (40%), provide more investment incentives and funding (20%), and provide more support in developing opportunities in international markets (22%).

Signs of a ‘Brexit Effect’? UK business least positive about trade opportunities for the year ahead

Half of businesses in the UK expect to increase trade activity over the next year – trailing the 62% global average – whilst around a quarter expect it to decline. These findings mean that businesses in the UK are by far the least positive about the year ahead, with over a third  calling out increased political uncertainty as the biggest barrier to international trade. The data also suggests that political uncertainty is a greater issue for larger UK businesses, with 41% of this group forecasting political uncertainty as a barrier, compared with 36% of medium sized businesses and 26% of small businesses.  This is particularly pertinent, as in the next 12 months almost half of UK businesses are set to prioritise trade with Europe (45%), followed by North America (26%), and Asia (21%).

The other barriers cited by 10% or more of UK businesses are uncertainty surrounding jurisdictional compliance (13%), lack of talent and human resource (13%) and variance in product standards across regions (10%).

Sabby Gill, MD UK and Ireland at Sage, said, “Our research suggests that businesses of all sizes are fully aware of the growth opportunities that exporting can deliver. However, in this Brexit backdrop, the existing trade policies and compliance roadblocks are clearly holding back their progress in implementing export strategies. Today, nearly a quarter of UK businesses expect to reduce the amount of overseas trade they do in the year ahead, the highest percentage across all nations.

“Economies need frictionless trade to grow and we know that everyday business activity is at the heart of this economic growth. Using data and technology to remove bottlenecks and complexity in trade must be a priority for regional and international productivity success.”

UK businesses are more likely to emphasise the importance of national governments addressing and removing the current barriers to trade than international counterparts, with 40% of UK businesses supporting trade policy reforms. This is matched only by Brazil (40%) and contrasts to only 21% of businesses in France also calling for the removal of trade barriers, increased investment incentives and funding along with access to better technology tools.

Key global findings from We Power the Nation include:

• 11 out of 12 countries cite international political uncertainty as the biggest barrier to investment in trade, with the highest levels reported in Brazil and South Africa.
• Switzerland is the only country to deviate from this trend, viewing lack of time as the biggest issue for businesses with trade ambitions.
• Three quarters of businesses say that their experience of 2018 has had a positive impact on forecasts for 2019 trade – falling to 1 in 2 in the UK.
• Europe is highlighted as a priority trading market for all 12 countries, with North America close behind featuring in the top three for all but one country.
• 1 in 2 businesses surveyed have exported goods over the past 12 months – with Spain leading at 76% and the UK trailing at just 24%.
• 1 in 5 businesses globally call out uncertainty around jurisdictional compliance as a barrier to invest in trading internationally.