Younger, faster, richer: does the UK’s future lie in the East?

In conversation with Patrick Winter, EY Asia-Pacific Area Managing Partner

Trade is fundamentally changing with the rise of trade disruptors, including geo-politics, technology, trade wars and, of course, COVID-19. Businesses around the world are going to have to work harder just to stand still. UK businesses in particular need to step-up their trade capabilities and think strategically about their trading arrangements in a way they haven’t done in decades.

With that in mind, I spoke with Patrick Winter, EY Asia-Pacific Area Managing Partner, about opportunities for UK businesses in the region.

Q What’s the significance of the Asia-Pacific area for the UK?

Asia-Pacific is one of the fastest growing regions of the world, which is an important consideration for the future. Some facts to put this in context:

• Two-thirds of the world’s GDP growth is from Asia-Pacific
• 50% of the world’s current GDP is from Asia-Pacific
• The region has 4.7 billion people, with a young age demographic compared to the rest of the world (only Africa has a younger population)

Q What are the stand-out opportunities for trade between the UK and Asia-Pacific?

There’s enormous growth across many sectors in Asia-Pacific, but the three that really stand out with regards to the UK are technology, healthcare and consumer.

From a technology perspective, there have been extraordinary advances from countries like Japan, which will have the 6G wireless network up and running by 2030 (not to mention being a world leader in technology for decades). The Association of Southeast Asian Nations (ASEAN) countries have invested strongly in technology around start-ups; it’s a very innovative part of the world. And, of course, you can’t talk about technology without mentioning China and the huge investment the government is making. This creates a ripple effect supporting technology and innovation across the region.

From a healthcare and life sciences perspective, the region has some of the most advanced healthcare systems in the world, for example in Singapore, Malaysia, Taiwan and Japan. With a population of 4.7 billion, the region is investing in the future of healthcare for its populations. We expect to see a big uplift in areas such as telemedicine and digital healthcare.

Lastly, for consumer markets – there’s a huge amount of consumer firepower in the region, particularly in China (now the world’s largest consumer market) and the ASEAN countries. The Generation Z cohort globally is biggest generational cohort ever: 25% of the Asia-Pacific population will be Gen Z by 2025. This group includes very sophisticated and passionate consumers, which we can expect to drive further innovation in this sector.

Q What factors do UK businesses looking to enter this market need to consider?

One of the most successful approaches we’ve seen from foreign businesses entering and succeeding in Asia-Pacific is the “Go Local” strategy. By this I mean strategic alliances with local companies, which also align with government policies. While governments play an important role around the globe, in this part of the world, governments have an extremely important role in every economy.

Another successful strategy we’ve seen is the “China Plus” strategy, where organizations create a base in China to feed a Chinese domestic market and from that expand into other markets and countries across Asia-Pacific. 

Free Trade Agreements (FTAs) are an important tool in dealing with global trade risk, but organizations also need to really understand how the country works in practice. Factors to consider here include the maturity of infrastructure and the level of domestic demand within the country you’re considering. In Asia-Pacific where there are a number of different, overlapping trade agreements, businesses have to assess which one will provide the most benefit to trade under.

Q The UK has fired the starting gun on joining one of the world’s largest trading areas. What are your thoughts on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)?

As you know, the CPTPP is a trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Seven of the 11 countries in the CPTPP are in Asia-Pacific, and it was good to see the UK formally applying to join the CPTPP in February 2021.

This free trade agreement eliminates tariffs on over 95% of goods traded between the signatories, as well as ambitious provisions for data flows and digital services. It’s a strong signal that unites the UK with other countries that believe in free trade, and I look forward to seeing how things develop.

Conclusion

No one can predict what the future of trade holds for the UK; currently, around 45% of British exports go to the EU and it will remain an important trading partner. But given the levels of trade disruption, it’s important for the UK to diversity its trading partners and keep an open mindset.

We do know from talking to businesses across the UK that trade is a complex issue that takes a great deal of knowledge and resource to work through. I think the best way for UK businesses to respond is to reach out and start building the capabilities needed to capture future opportunities.

Personally, I feel a huge sense of optimism with the work underway to join and create trade agreements like the CPTPP.