This article by Carl Richardson was first published in the Express & Star newspaper - www.expressandstar.com
'The unexpected turbulence experienced throughout the world in 2022 demonstrates exactly why there is no future in crystal ball gazing.
Few would have predicted the events of the past twelve months, yet, as 2022 draws to a close, businesses will continue to evaluate a host of economic factors in order to plan effectively for the future.
After all, it is only by doing this and generating business growth that jobs are created and taxes raised, which ultimately pays for our public services.
While our crystal ball is certainly no clearer than anybody else’s, as a family business with interests around the world - and in the spirit of the festive period - here are three high-level global business themes for consideration as we look ahead to the new year.
· Enduring strength of the US.
· Can we talk about Europe?
· Asia’s century continues.
Enduring strength of the US
As we enter 2023, the US remains the world’s largest economy by some distance. It also continues to be both the UK’s largest single trading partner and a great place in which to do business.
While a full Free Trade Agreement (FTA) with the US is unlikely to happen any time soon due to a host of reasons, the UK has shown admirable innovation over the past year by seeking to sign ‘Memorandums of Understanding’ with a number of American states.
Although these are not as binding as an FTA, such agreements should still help to ease the movement of goods, services and people for UK businesses operating in these locations.
Deals have already been signed with Indiana and both North and South Carolina, while talks are now also progressing with Utah and California, the 5th biggest economy in the world.
North America has long been a core market for our family business, which holds investments across the country from New York to San Francisco.
One such investment is in GO Car Wash, a premium car wash business which is aiming to become the world’s most admired such organisation.
Headquartered in Denver, Colorado, and operating in 8 states with over 100 locations, Go Car Wash has experienced rapid growth since it started operations in 2019. While that is undoubtedly down to the great management within the business - one of our core criteria when making an investment – it also demonstrates just what a business can achieve in the US, and why it will remain such an attractive market in the years ahead.
Can we talk about Europe?
With the 7th anniversary of the Brexit referendum approaching one hopes that serious moves can be made in 2023 to remove some of the administrative friction which is undoubtedly suppressing trade between the UK and the EU.
One of the benefits of Brexit is the opportunity to diverge from long-established EU rules and to introduce more business-friendly regulation that can encourage investment and create jobs. In turn these generate the prosperity and taxes that pay for our hospitals, police and other public services.
While the reality of this is currently working through Parliament in the form of the ‘Retained EU Law’ bill, the Government has a difficult - yet important - balancing act to manage in terms of simultaneously improving the trading relationship with our European neighbours.
Post-Brexit, that relationship is now governed by the UK-EU Trade and Cooperation Agreement (TCA), which sets out the new rules for the movement of goods, people and services.
The Treasury estimate that the extra layers of regulation and form-filling required to comply with the TCA before businesses can export will inflict a 4% hit to our GDP in the medium term, as more and more business decide that exporting simply isn’t worth the hassle.
This is a trend that the country must work hard to avoid taking hold. With jobs connected to exporting paying on average 7% more than non-exporting equivalents, boosting the volume and value of goods and services sold overseas can play a key role in turbo-charging economic growth.
While trade between the UK and the EU has been in gradual decline since the early 2000s, pre-dating the referendum, the EU as a whole is still the UK’s largest trading partner, worth over £250 billion in terms of exports in 2020 (42% of all UK exports).
The political reality of improving the terms of the TCA to help businesses to export more, without being seen to be working against the result of the 2016 referendum, is of course difficult. However, as businesses across the country seek new opportunities and markets in order to help trade through current challenges, it would certainly be a worthy endeavour for the year ahead.
Asia’s century continues
The importance of the Indo-Pacific region will continue to grow during 2023 and beyond.
This was recognised in the Government’s 2021 ‘Integrated Review’, which acts as an overarching national strategy for the UK, and highlights how over the next decade the global geopolitical and economic centres of gravity will increasingly move eastwards.
McKinsey estimate that by 2030 Asia will be home to 65% of the world’s 5.5 billion middle class consumers. With this size of market, together with so many supply chains that ultimately end in the UK starting in the region, the Indo-Pacific should be of ever-increasing interest to UK businesses seeking opportunities to grow. This matters back home, as success in these expanding markets will help to create new jobs in the UK, bringing more people back into work, aiding our economic recovery and ultimately supporting our public services through the increase in tax revenue.
It is heartening to know that UK Trade officials are working hard to lay the ground work for improved trading relations in the region. Talks continue for the UK to join the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) whose 11 existing member countries account for 15% of global GDP. Discussions are also well progressed with India around a new Free Trade Agreement, to go alongside recent such deals with Japan, Australia and New Zealand.
As the economic importance of the Indo-Pacific to the UK grows then so does our interest in the stability of the region. From a security perspective, the growing international assertiveness of China alone presents very valid reasons why the UK needs to further develop its presence so that we can help to shape and influence events for our own security.
On a more tangible level, having a greater ability to protect trade routes and supply chains that begin in the region will have a direct impact on those UK businesses and consumers who depend on them functioning efficiently.
Encouragingly, this increased focus on security has already started, as demonstrated by the show of strength with the visit of the UK’s carrier task force in late 2021, the permanent deployment of HMS Tamar and Spay to the region and also through the trilateral AUKUS agreement between the UK, Australia and US to significantly bolster Australia’s military capability.
Our own business has been active across Asia-Pacific for a number of years, with investments in Australia, New Zealand and Singapore. We have recently been involved with Baker & Cook, an artisan-style bakery chain that has seen rapid growth in multiple locations throughout Singapore as well as Malaysia and the Philippines, and we continue to explore new opportunities as we move into 2023.
As the new year dawns, the world is more interconnected than ever before.
While our crystal ball may be no clearer than anybody else’s in terms of what 2023 may bring, we are certain that businesses will rise to the challenges and seek out the opportunities that exist around the world as they strive to generate the growth that ultimately benefits all of us in society.'