Post-Brexit trade deals

International Trade Secretary Liam Fox and South Korean counterpart Yoo Myung-hee signed a free trade agreement (FTA) in order to maintain trade arrangements after Brexit, BBC reported.

This is the first post-Brexit trade deal the UK has agreed with an Asian country and is on similar terms as the ones already established through the existing European free trade agreement the UK currently has with Korea.

South Korea is the fourth largest economy in Asia, producing electronics, steel and auto industry. In just 2018, South Korea exported $6.36bn (£5.0bn) worth of goods to the UK.

With the Brexit deadline set for 31 October, and the UK possibly leaving with or without a deal, the UK realises that it needs to provide continuity in its trading relationship with other countries so that businesses in the UK can be prepared, find the necessary support to maintain growth and productivity.

As Mr Fox said: "The value of trade between the UK and Korea has more than doubled since the EU-Korea agreement was applied in 2011. Providing continuity in our trading relationship will allow businesses in the UK and Korea to keep trading without any additional barriers, which will help us further increase trade in the years ahead. As we face growing global economic headwinds, our strong trading relationship will be crucial in driving economic growth and supporting jobs throughout the UK and Korea."

 

Exporting to South Korea

The secured deal covers South Korean exports such as cars and auto parts. It exports cars and ships to the UK and the UK exports to Korea crude oil, cars and whisky.  The deal will be ratified by the end of October and implemented in November.

According to Andrew Walker, BBC World Service economics correspondent, “Tariff-free trade with South Korea is certainly worth preserving. British goods exports to Seoul climbed sharply after the EU's deal with South Korea was implemented in 2011. Last year the UK sold about £6bn worth of goods there.” South Korea is one of the bigger countries that the UK has enjoyed access through an EU trade deal, with UK goods imports from South Korea exceeding £4bn. The UK is South Korea's second largest trading partner from the EU.

The South Korean international trade secretary, Ms Yoo said: "The deal is significant as it eased uncertainties sparked by Brexit, amid the already challenging environment for exports on the escalating trade row between Washington and Beijing.”

 

Brexit and trade

With the Brexit deadline looming, the UK is trying to seal more agreements with trading partners. If it leaves without a deal, the UK would lose many of the existing trade agreements it currently has as a member of the EU, something that will disrupt 11% of the UK’s total trade.

According to the UK government website, the UK has signed continuity trade agreements with non-EU countries so trade is not disrupted after Brexit. The UK has signed trade agreements with Israel, Iceland and Norway, Switzerland and Chile, among others.

 

UK Importing and Exporting

As the UK government is trying to secure more trade agreements with other countries, Brexit will continue to affect the economy and the political landscape. As an international company importing and exporting goods to and from the EU, you most possibly have been using a foreign exchange company to transfer your funds internationally. Universal Partners FX can help you save time and money on imports and exports, especially when you have to do frequent international payments.

 

Get in touch with Universal Partners FX to access the best exchange rates available and over 140 currency pairs. Your foreign exchange specialist will monitor the markets for you and tailor the ideal solution for your business.  

Brexit uncertainty

Brexit has weakened Britain’s manufacturing sector as the latest industry health check from data firm Markit showed. New orders and employment declined last month due to Brexit uncertainty and the impact of the US-China trade war. This was the worst performance for Britain’s factory sector since the EU referendum three years ago.

Firms reported that they have slowed their stock-piling, after the latest Brexit extension to the 31 October. While businesses had been stockpiling to meet the original deadline for Brexit at the end of March, order books shrank rapidly. According to economists, Britain’s factories could be heading into a recession now that the possibility of a cliff-edge no-deal Brexit is no longer on the table.

Markit says: “New order inflows deteriorated from both domestic and overseas sources. New export business fell for the second month running and at the quickest pace in over four-and-a- half years. Manufacturers reported lower demand from Asia and Europe. There was also mention of Brexit uncertainty, including clients diverting supply chains away from the UK, leading to lower demand from within the EU.”

This resulted in Markit’s UK manufacturing PMI fall to 49.4, which is the lowest reading since July 2016, when factories were recovering from the Brexit vote. Despite hopeful predictions from the City which forecasted the PMI around 52, unfortunately, the sector contracted in May.

What is the PMI?

The purchasing managers’ index (PMI) is a closely watched survey that shows the health of the manufacturing sector, which was 53.1 points a month earlier. The IHS Markit /CIPS UK Manufacturing PMI is compiled by IHS Markit from results gathered from questionnaires sent to purchasing managers in a panel of around 600 manufacturers.

What were the UK survey’s findings?

The decline was something experienced by both manufacturers in the UK and the Eurozone, who suffered a considerable decline, with the purchasing managers’ index falling from 47.9 in April to 47.7 in May.

The UK survey found that the Brexit delay was followed by a decrease in domestic and overseas orders. Brexit uncertainty caused companies to move supply chains away from the UK, while limited production meant a second month of job losses. Despite the contraction, manufacturers remain positive and believe that a Brexit deal will be in place, with 49% expecting a higher output in a year.

Rob Dobson, a director at IHS Markit, said: “The UK manufacturing sector was buffeted by ongoing Brexit uncertainty again in May. The trend in output weakened and, based on its relationship with official ONS data, is pointing to a renewed downturn of production.”

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “Concern for manufacturers has deepened this month as the sector’s performance shrank in May and tumbled into contraction. With one of the fastest shrinking rates seen in six and a half years and the biggest drop since July 2016, straight after the referendum result, based on this result, there is the likelihood of more bad news to come.”

Manufacturing Organisation Make UK’s Warning

Before the disappointing data from Markit, Make UK, the UK’s leading manufacturing organisation, had already warned that a no-deal Brexit will be damaging to the economy, reporting weak investment.

The manufacturing organisation said that the UK leaving the EU without a deal will be “economic lunacy.” From Boris Johnson, and Andrea Leadsom, to Dominic Raab and Sajid Javid, all these candidates to replace Theresa May as the Tory leader, have agreed to press for a Brexit on 31 October, whether or not there was a deal.

Chief executive of Make UK, Stephen Phipson explained that the manufacturing sector was on a “weakening trend.” He added: “Earlier this year there was clear evidence that industry was on steroids as companies stockpiled. Underneath, however, there is now growing evidence of European companies abandoning UK supply chains, while Asian customers balk at the unknown of what may exist as the UK leaves trade agreements which operate under EU rules.”

If you are a manufacturer or a business that is exporting or importing, then, possibly, Brexit anxiety has affected your finances. Save time and money on imports and exports when using Universal Partners FX. Universal Partners FX is the best option for wholesale and distribution companies making regular payments. Get in touch with your dedicated dealer and take advantage of expert knowledge and strategic financial planning.

UK exports to Europe

Brexit has caused a lot of uncertainty for UK importers and exporters. The difficulties facing many British companies trading overseas have become an inseparable part of Brexit debates. For many, the issue lies with the UK’s decision to leave the EU.

In an article on the Guardian, Gareth Stace, director general of the trade association UK Steel, argues that leaving the EU has the potential to cause a great deal of damage to exports and weaken the sector more.

British Steel

In an attempt to present his views and the general steel industry’s position when it comes to its current issues and Brexit uncertainty, Stace admitted:

“There can be no doubt that the ongoing Brexit uncertainty has contributed significantly to British Steel’s problems. Unable to decipher what the UK/EU trading relationship will be in just five months’ time, planning has become fiendishly complicated for both UK exporters and their EU customers.” He also added that things have become more complicated with the EU’s recent measures seeking to prevent steel imports surging, a move that reflects a more general protectionist turn seen elsewhere.

As Stace wrote, “Post-Brexit, UK steel exports to Europe will be restricted by these measures, with a disorderly no-deal Brexit affecting them particularly badly.”

No deal Brexit is bad, but what about an orderly Brexit?

Stace elaborated on the question of whether a well-organised Brexit would improve things for steel exporters. For example, he questioned those who claim that with the UK being outside the EU, the government would support extensively the steel industry. As he argued, “the UK steel sector has no interest in operating under the support of state subsidies (we are vociferous critics of this practice in places such as China).”

He emphasised that the UK’s ability to provide state support was restricted nonetheless, due to its WTO membership, “which bans certain subsidies outright, and allows others to be counteracted by other WTO members with the imposition of ‘anti-subsidy duties’ – effectively closing off important export markets.” He also pointed out that the EU has already aligned itself in terms of state aid rules, so any agreement between the UK and EU would not be beneficially better. Similarly, other countries such as the US would also want to align themselves with the current provisions when they strike trade agreements with the UK, so the UK would not, in essence, enjoy any special treatment.

“Brexit would not provide greater trading opportunities”

The Brexiters’ mantra has been, since the beginning, based on the premise that the UK’s withdrawal from the EU would come with the promise of striking limitless deals. Boris Johnson used this slogan in many occasions, but the “freedom to do our own trade deals,” as many Leavers have proclaimed, is not an easy fit. This is also the case for the steel industry. Stace clarified that Brexit would not come with the opportunity to strike many deals. As he said: “WTO tariffs on steel in developed countries are already zero, and the EU’s expanding list of FTAs is providing tariff-free access to many others. There is little advantage any new UK FTAs could offer.” Additionally, as UK-produced steel “qualifies as EU steel under complicated rules of origin within the EU’s FTAs,” this means that any European country can use it, whereas, after Brexit, UK steel “would be classified as UK not EU, reducing the attractiveness of it to EU manufacturers.”

In essence, Stace explained, “Brexit will not improve the situation for the steel sector but it has the potential to cause a great deal of damage.” For him, the biggest priority is to secure a withdrawal agreement as soon as possible. And this is what most businesses are also demanding.

Brexit

France and Spain’s property markets are among the favorites for many Brits, despite Brexit. In many ways, Brexit did not change Brits’ desire to move permanently to France or Spain, indeed, it has, paradoxically made it stronger. With Brexit strategy in tatters, the UK confused about its own European identity and a climate that cannot compete with that of sunny Spain, for example, many are determined to look for a home overseas.

Uncertainties of moving abroad

Planning to purchase property abroad is a long process, and for those who have already started or are in the midst of deciding, there is nothing that can really stop them, not even the uncertainty of Brexit. Nonetheless, there are worries about their new life in Europe. For instance, many Brits worry about the lack of affordable healthcare, long legal processes of buying property, or just simply maintaining their property back in the UK due to a weak pound. But these are issues that can be tackled, to a certain extent. Finding a place in the sun to retire is perhaps a bigger enough reason that propels Brits to move abroad, even though they are aware of the possible problems. A peaceful life in the countryside is definitely more attractive, than remaining trapped in a little house back home. Enjoying a higher standard of life is a solid fact that cannot be shaken by the uncertainties of the process or the current unstable political landscape. As many have enjoyed the perks of living abroad through their regular visits and holidays overseas, it is very difficult to resist the lure of the good weather and of long cool nights under starry skies.

More European because of Brexit?

With the European elections taking place from the 23 to 26 May, it is impossible to forget Brexit. It is interesting to see how it has affected Brits in the way they perceive themselves. According to Radio France Internationale, 23-year-old English au pair Emma has been in France since August and despite coming from Thetford, where many voted for Brexit, she feels European and wants to live in Europe. It was, ironically, Britain’s decision to leave the EU that pushed her to move to another country. Like many other Brits living abroad, Brexit has affected their decision and made them understand the benefits of their European heritage. As the article reported, “the Brexit decision has created practical problems for them but also raised questions about identity.”

Sterling and Brexit

Whether motivated by Brexit or your own personal desires and wants, the decision to move overseas comes with a lot of considerations. One of the biggest ones is making your money go further, and taking advantage of currency volatility so that it does not affect your savings. Everyone has noticed that this week the pound has suffered against the euro due to turmoil in Downing Street affecting currency markets worldwide.

The fact that Theresa May’s premiership is now being questioned after her failure to get approval for her Brexit deal, has impacted on the pound, which dropped against the euro.

Theresa May’s time is coming to an end. Initially against Brexit and later having to negotiate a deal— which for many hardcore backbenchers and hardline Brexiteers was not desirable or close to what the British people have voted for in the 2016 referendum—May was given an almost impossible task. Her replacement and the possibility of a no-deal Brexit are now appearing to be, not only the stuff of nightmares, but also a reality leading currency traders to avoid the pound.

Buying property overseas is a complex process and having a trusted currency broker by your side is a massive advantage when it comes to the current movement of the pound. Universal Partners FX can help you navigate a volatile market and transfer money internationally, mitigating the negative effects of Brexit and a weak pound, and ensuring that your funds are not impacted by exchange rates. Get in touch today with your currency dealer and find out how much you can save on your currency transfers.

International trade after Brexit

The future of the UK’s international trade is still uncertain as Brexit looms and the terms of the UK’s departure are not yet set in stone. Financial Director reported that the future relationship of importers and exporters with Europe and the world after Brexit continues to be the subject of much debate.

What has been happening?

Brexit has indeed already tarnished the economy and is affecting UK exports, despite the wishes of many Brexit supporters who had claimed the opposite. It was perhaps partly due to Brexit that, in February 2017, Secretary of State for International Trade, Dr Liam Fox, had changed the Conservative government’s expectations of “doubling UK exports to £1 trillion by 2020.”

While not up to £1 trillion, Fox would later change the Government’s target to increase exports as a percentage of GDP from 30% to 35%, after positive ONS figures were released for the period between November 2017 and November 2018. In particular, it was shown that the number of SMEs exporting to overseas markets increased by 6.6% to 232,000 (9.8% of all SMEs), and of larger businesses exporting increased by 6.1% to 3,500 (41.7% of all large business). The UK’s total exports increased to £630bn in November 2018. While towards the right direction, problems still remain and many exporters are considering costs and how to grapple with the changing landscape, while continuing to develop their business.

Stirling volatility

According to SMEs, a volatile market is one of their biggest problems. As the Institute of Export and International Trade reported, “While it was expected that a weaker pound would make UK exports more competitively priced, this was offset for many SMEs by both more expensive imports and currency volatility. In fact, (34%) said at the time that currency volatility was the greatest challenge they faced.  So, whilst a weak pound may have had a positive impact, the uncertainty certainly didn’t help SMEs manage their currency costs or importing foreign goods and services.”

Alongside worries about the effects of a weak pound, businesses have been concerned with “export licences, customs declarations and VAT invoices” in order to protect themselves and comply with legislation.

Brexit

Brexit is a major disruptor of international trade. According to government statistics, the EU is currently the UK’s main trading partner, with 44% (£274 billion) of UK exports to the EU each year. UK imports from the EU were estimated to be 53% (£341 billion).

In terms of VAT and customs duty, Brexit will affect taxes and result in higher import taxes and more complex administrative procedures. Brexit also means defining the trading relationship between the EU and the UK, which will demand further negotiations, as well as the trading relationship of the UK with other countries.

Additionally, currency traders are currently worried that a hard Brexit—exiting the EU without a deal—might even be back if Nigel Farage’s Brexit party does well in the European Parliament elections. A large Eurosceptic vote would open the path for Boris Johnson to succeed Theresa May, analysts have noted.

Universal Partners FX

As an international business which specialises in helping other businesses deal with currency fluctuation and international transfers, UPFX understands the difficulties and challenges of transferring large amounts of money. Whether Brexit comes with the promise of future relationships or with added uncertainty, your business, nonetheless, will most likely be facing a volatile pound and an unpredictable market. To mitigate unexpected market movements and protect your business, get in touch with your dedicated currency dealer at UPFX to discuss how they can help you save money and hedge your funds.

Brexit for businesses

Everyone is talking about Meghan and Harry’s royal baby, but have you considered how to Brexit-proof your business? Businesses importing to or exporting out of the UK have been advised to prepare for a no-deal Brexit. While many have reportedly shaken off the threat of a hard Brexit, the possibility of a no-deal still remains, with economists expecting growth to remain subdued for the rest of 2019.

So how ready are you and your UK business when preparing for the possibility of a no-deal Brexit?

What does no deal mean?

A no-deal Brexit means that the UK will leave the European Union (EU) without an agreement that would define their future relationship. This will result in the UK losing its access to the European single market which allows for the free movement of goods. If politicians are unable to come to an agreement, and the government fails to provide the necessary plans, the UK would be trading on World Trade Organization (WTO) terms.

Trading on WTO terms?

What are the implications of the UK falling back on WTO terms? Trading on WTO terms means that the UK would lose the benefits it currently enjoys, with more British imports and exports facing tariffs. UK services will obviously lose access to the EU’s single market and would only be able to have more restricted access following the WTO terms.

According to  UK in a Changing Europe, an independent initiative funded by the Economic and Social Research Council (ESRC), by reverting to WTO terms, the UK will face import duties and various controls when trading with the EU. This will specifically affect such industries as those of agriculture and those depending on products such as components to make cars or ingredients for processing food. Additionally, the initiative pointed out that “the UK would lose the benefit of free trade agreements it now has with countries such as South Korea and Canada as a member of the EU.”

While many countries are trading on WTO terms this does not mean that they are limited to the deals they can have. As the UK in a Changing Europe notes, “All 164 WTO members have better access to at least one market either through a free trade agreement or through duty-free preferences for developing countries. Most countries have several deals, even if they do not all have one with the EU or the US.”

Beyond preferential agreements on market access, there are also other agreements that help trading between countries. The Financial Times has reported in 2017 in “After Brexit: the UK will need to renegotiate at least 759 treaties,” that the EU has at least 759 agreements with 168 non-EU countries, including those relating to regulatory cooperation, customs and agriculture. Many countries pursue agreements beyond those of the WTO agreements in order to overcome boundaries and increase economic growth.

At the end of the day, independent bodies such as that of the UK in a Changing Europe, stress that the benefits of a free trade agreement with the EU are less than those of the EU single market, but greater than just the WTO terms.

What does this mean for your business?

As a recent Forbes article noted, in the possibility of a no-deal Brexit, your business can take some actions into consideration when preparing for the impact of Brexit.

The article mentions, among other things, that assuring what your business’ needs are to maintain operations in case of a no-deal Brexit, is important. As it states, “If you’re importing goods from the EU to the UK: you’ll need to register for a UK Economic Operator Registration Identification (EORI) number and Value-Added Tax (VAT) number.” Also, if you are “importing goods from the UK to the EU: you’ll need to either incorporate your business within the EU or find a third party established in the EU who is willing to act as the importer of record.” As the article points out, if you are not aware of Customs classifications, it will be helpful to get help from a customs brokerage, with 180,000 importers  “expected to need to clear Customs for the first time after Brexit.”

Mitigating Brexit impact

Your company may have several strategies to mitigate the effects of Brexit, including, optimizing your supply chain by re-evaluating the location of your warehouses or “setting up mixed bonded and free circulation facilities.”

But it is also very important to work closely with a currency broker such as Universal Partners FX (UPFX) who can help you with your international transfers and suggest ways to mitigate the negative effects of Brexit. You can also follow Universal Partners FX’s news to remain up to date with the latest developments regarding financial data and Brexit.