Has Brexit been good or bad for UK businesses trading overseas.

Since the Brexit referendum in 2016, the landscape for businesses in the UK, especially those involved in importing and exporting goods, has experienced significant changes. The UK's departure from the European Union (EU) has introduced new trade dynamics, regulations, and challenges that have both hindered and, in some cases, benefited UK businesses trading abroad. This blog explores the multifaceted impacts of Brexit on UK businesses and speculates on what the future may hold.

Impact on Importing and Exporting Goods

Regulatory Changes and Trade Barriers:

One of the most immediate and tangible impacts of Brexit has been the introduction of new customs procedures and regulatory requirements. UK businesses now face additional paperwork, customs checks, and compliance with divergent standards, which have increased the complexity and cost of trading with the EU. The end of frictionless trade has led to delays and disruptions, affecting supply chains and delivery times.

Tariffs and Non-Tariff Barriers:

Although the UK-EU Trade and Cooperation Agreement (TCA) has prevented the imposition of tariffs on most goods, non-tariff barriers such as rules of origin requirements have emerged as significant obstacles. These regulations determine whether goods qualify for tariff-free status based on where their components are sourced, adding another layer of complexity and potential costs for businesses.

Supply Chain Disruptions:

Brexit has caused considerable disruptions to supply chains. Many UK businesses relied on just-in-time delivery systems, which have been severely affected by border delays. The need for increased inventory to buffer against these delays has led to higher storage costs and operational inefficiencies.

Benefits and Opportunities

New Trade Agreements:

Brexit has enabled the UK to negotiate its own trade deals independently of the EU. This has opened opportunities for UK businesses to explore new markets and establish trade relationships with countries such as Australia, Japan, and the United States. These agreements often come with favorable terms that can potentially offset some of the disadvantages faced in trading with the EU.

Regulatory Flexibility:

Outside the EU, the UK has the flexibility to create its own regulations and standards, which can be tailored to benefit local industries. This regulatory autonomy can foster innovation and competitiveness, particularly in sectors where the UK has strong capabilities, such as finance, technology, and pharmaceuticals.

Hindrance or Benefit?

The perception of Brexit as a hindrance or benefit varies significantly across different sectors and business sizes. For many small and medium-sized enterprises (SMEs), the increased costs and administrative burdens have been predominantly seen as a hindrance. These businesses often lack the resources to navigate the new complexities effectively.

Conversely, larger corporations, especially those with global reach, have been better positioned to adapt. They have the resources to manage the regulatory changes and explore new international opportunities. Some have even seen Brexit as a chance to diversify their market base and reduce dependency on the EU.

How about the financial implications with the pound losing value

Initial Impact and Subsequent Volatility:

Immediately following the Brexit referendum, the GBP dropped sharply against major currencies like the US dollar (USD) and the euro (EUR) 10%+ and 7% respectively in the first 24 hours . This depreciation made UK exports cheaper and more competitive internationally, potentially benefiting exporters. However, it also made imports more expensive, increasing costs for businesses reliant on imported goods and materials.

Exporters and Importers:

For exporters, a weaker pound has generally been beneficial as it lowers the relative price of UK goods in foreign markets, boosting demand. This has been a silver lining for sectors such as manufacturing, automotive, and agriculture. However, the benefits are nuanced, as many exporters also import components or raw materials, thus facing increased costs due to the weaker pound.

For importers, the impact has been predominantly negative. The increased cost of imported goods and raw materials due to the weaker pound has squeezed profit margins. Businesses have had to decide whether to absorb these costs or pass them onto consumers, potentially reducing demand.

Hedging and Financial Strategies:

To mitigate the risks associated with currency volatility, many UK businesses have adopted hedging strategies. By using financial instruments such as forward contracts and options offered currency exchange specialist companies like Escape Currencies, businesses can lock in exchange rates and protect against adverse movements. While these strategies can offer protection, against potential losses due to currency exchange rate fluctuations.

The Future of UK Trade

Looking ahead, the future of UK trade is likely to be shaped by several key factors:

Adaptation and Innovation:

Businesses that adapt quickly and innovate in response to new trade environments will likely thrive. This includes investing in technology to streamline customs processes, exploring alternative supply chain strategies, and seeking new markets.

Government Support and Policies:

The UK government’s role in supporting businesses through financial aid, training, and streamlined regulations will be crucial. Effective policies can help mitigate the negative impacts of Brexit and leverage the opportunities presented by new trade agreements.

Global Economic Conditions:

Global economic trends, such as the rise of protectionism, shifts in global supply chains, and economic recoveries post-pandemic, will also influence the success of UK businesses in the international arena. Also the imminent and potential changes in leading governments around the world, will also want to have thier own say on how things are done. The UK has recently voted in a new Labour government lead by Sir Keir Starmer so it is to be expected new negotiations will be be taking place.

In conclusion, Brexit has brought both challenges and opportunities for UK businesses involved in importing and exporting goods. While the increased complexities and costs have posed significant hurdles, the potential for new trade relationships and regulatory autonomy offers a silver lining. The future will depend on the adaptability of businesses, supportive government policies, and the broader global economic context.

While a weaker pound has benefited exporters, it has increased costs for importers, squeezing margins and impacting investment decisions. Businesses have had to adopt financial strategies to manage these risks, highlighting the need for sophisticated financial management in a post-Brexit world. The help of an account with a specialist currency exchange firm like Escape Currencies is one move that can help your business financially.