In the final part of a series of three articles, Carl Richardson discusses the catalyst that international trade can play in supporting Britain’s economic growth.
Trade
It was Sir Walter Raleigh who said, “Whosoever commands the sea commands the trade; whosoever commands the trade of the world commands the riches of the world, and consequently the world itself.”
The UK may no longer be seeking to command the world, but it does have a key role to play internationally, and the importance of trade in establishing and maintaining a position of global relevance was well stated by the Elizabethan explorer.
In terms of international trade there is much that the UK already does well, as evidenced by the fact that the country is currently the 2nd highest exporter of services in the world, behind only the US¹.
However, this ranking falls to 11th in terms of the export of goods², highlighting a key area in which there is room for the UK to improve exporting performance.
This headline number also disguises some of the regional economic disparities that exist within the UK. While 26% of jobs in London are connected in one way or another with the export of goods or services, this figure is significantly lower as you move away from the south-east, falling to 2.6% for businesses in the North-East³.
Jobs connected to exporting pay on average 7% more than non-exporting equivalents⁴. Therefore, boosting the volume and value of goods and services sold overseas can play a pivotal role in truly helping to level up the economy of the UK, bringing new investment, new industries and good jobs to places like the West Midlands.
Is it time to stop talking about Brexit?
We are now over six years on from the Brexit referendum. Whether you voted to leave or to remain the decision has been made and it is crucial that the country seizes the reality of the situation and takes full advantage of the opportunities that not being part of the EU presents for Britain on the world stage.
Viewed dispassionately, the opportunity exists to diverge from long-established EU rules and to introduce more business-friendly regulation that can encourage investment and job creation. Processes around the import and export of goods and services can also be streamlined as part of an overarching strategy to make the UK THE place to do business in the world.
There is no question that the referendum itself was divisive and challenges remain as we decouple from the EU. Nonetheless, potential opportunities from a trading perspective exist and are a gift that should not be squandered.
Bonfire of Barriers
In June, the International Trade Secretary, Anne-Marie Trevelyan spoke about leading a concerted push to remove up to 100 restrictions that had been identified as blocking British businesses from trading overseas, in a ‘bonfire of the barriers’.
Examples such as removing delays in registering new UK medicines and medical devices in South Africa were given, although more details have been withheld due to understandable commercial sensitivities.
It is to be hoped that these initiatives are being followed through by our trade officials. With an estimated £20 billion in export opportunities to be opened up with the removal of restrictions, this is a great example where effective delivery of a plan would provide significant benefits to job and wealth creation.
Freeports
The establishment of Freeports is another constructive move towards encouraging regions and businesses to develop international trading activities.
This is being well demonstrated on Teesside, the first of the 8 Freeports announced in 2021, where the benefits offered by freeport status, including a package of tax reliefs, simplified customs procedures and streamlined planning processes, have been seized upon.
Last month the Korean business SeAH Wind started construction on a new £400m factory producing bases for offshore wind turbines on a 1.1 million square foot site within the Freeport. Ultimately the turbines will be transported directly from a new quay that is being built in the Freeport out to what will be the world’s largest wind farm on Dogger Bank in the North Sea.
The SeAh factory will create over 750 new jobs in the area, with many more coming indirectly in the supply chain. This will also help to establish Teeside as a world leader in the field of wind technology. In time the area should also see itself exporting skills and products around the world.
Our businesses know this area well. By way of disclosure, in conjunction with a range of prominent partners, our family is currently developing the mixed-use Milburngate development in Durham, a new HQ for the Home Group in Newcastle and the £300m Sage Arena and conference centre on the banks of the Tyne.
There is a genuine sense of momentum in the air across the region, in which the Freeport plays a central role.
Freeports also demonstrates how businesses will respond constructively to government policies which incentivise investment with easy-to-understand benefits and timeframes, just as it did with the 1980s version of Enterprise Zones.
Asia-Pacific and CPTPP
Our family office has long supported the UK’s efforts to join the ‘Comprehensive and Progressive Trans-Pacific Partnership’ (CPTPP).
This is a free trade agreement between 11 countries around the Pacific Rim, including Australia, Canada, Japan and Singapore, whose collective economies represent nearly 14% of global GDP. By 2030 Asia will be home to 65% of the world’s 5.4 billion middle class consumers, and so joining the CPTPP and strengthening trading ties in the region as part of the UK’s more general ‘tilt’ towards the Indo-Pacific shows commendable foresight.
Accession to the CPTPP should be concluded by the end of the year and will be a material step forward to create conditions to encourage British exports.
Britain also has Free Trade discussions underway with India, Israel and the six states that make up the Gulf Co-operation Council.
However, with the world evolving at pace and becoming ever more competitive, it is crucial that the UK keeps pushing hard to establish more effective trading opportunities for business.
Europe
The ‘Partnership Council’, was established to oversee UK-EU trade relations in the aftermath of Brexit. Unfortunately, it has not met since June 2021.
With trade to the EU accounting for nearly half of British exports, from a wealth and job creation perspective, one would suggest that a renewed vigour may be required to optimise the trading conditions for companies with the European market.
The United States
The US remains the UK’s largest single country trading partner. It accounts for £126 billion – or over 20% - of UK exports.
Our family holds a number of investments in the US, including a recent investment in the rapidly expanding Go Car Wash. It is an attractive market in which to do business, and yet the prospects for a Free Trade Agreement with the US are remote at present. Indeed, Uncle Sam hasn’t signed a new FTA since 2007.
Initiative has been shown in recent months by the Department of International Trade with the signing of a state-level trade agreement with Indiana. This signals an intent to improve trade at a state rather than federal level if necessary, but falls short of a full Free Trade Agreement with our single most important export market.
Dubai and the World Expo
The competitive nature of the global economy was demonstrated in spectacular fashion at the latest World Expo, which recently concluded in Dubai. This showcase of innovation and economic development featured pavilions from 192 countries, all putting their best foot forward to the 20 million guests who visited the site over the course of the Expo.
The UK pavilion, designed to demonstrate our leading position in matters of technology and creativity, featured.
Nonetheless, the attention of our team who visited the Expo was particularly drawn to the nearby pavilion of Baden-Wurttemberg, the only region to have a stand-alone presence at the show.
This was a £15 million investment by a German region that features Stuttgart as its largest city, and an admirable display of self-belief by an area that wants to trade more on the world stage.
The next World Expo is taking place in Osaka, Japan in 2025, and it wouldn’t be surprising to see more regions following this lead in having their own presence there. Could this be an opportunity for the West Midlands to consider?
Returning Home
If the UK wants to continue to command a sizable share of world trade, then, amidst intense competition, can it afford to rest on its laurels?
Over the summer the Commonwealth Games shone a spotlight on the UK, and the West Midlands in particular. In return the region more than played its part.
The challenge now, as the autumn approaches and with a new Prime Minister in Downing Street, is to retain that can-do spirit and build on it with a clear plan.
If delivered this would more than likely allow the wealth and job creating community to flourish, and thereby help to underwrite further funding for our worthy public services.
This article first appeared in the Express & Star on Tuesday 30th August, 2022 - It is time to look beyond Brexit to grasp the chance to embrace globe | Express & Star (expressandstar.com)
Appendix:
¹ World Bank, Service exports, https://data.worldbank.org/indicator/BX.GSR.NFSV.CD 28
² World Bank, Goods exports, https://data.worldbank.org/indicator/BX.GSR.MRCH.CD
³ Department for International Trade, 2021, Estimating the relationship between exports and the labour market in the UK https://assets.publishing.service.gov.uk/government/ uploads/system/uploads/attachment_data/file/966549/Estimating-the-relationshipbetween-exports-and-the-labour-market-in-the-UK.pdf
⁴ UK Board of Trade,Global Britain, Local Jobs, 2021 Board of Trade report: global Britain, local jobs - GOV.UK (www.gov.uk)