US Is the Preferred Trading Partner in a Post-Brexit World
Almost half of UK SME businesses say they would prefer to do business with America after Britain leaves the EU.
With Britain’s withdrawal from the European Union still mired in uncertainty, new data from Western Union (NYSE: WU) shows that one in four UK businesses are planning to reduce trade with the EU in the next five years and are looking both West and East to build new trade partnerships in a post-Brexit world.
Western Union’s H1 Barometer Report shows that the preferred choice of trading partner is the US, with almost one in two (48%) businesses saying they are keen to pursue opportunities with Donald Trump’s America. The next most popular country is China (43%), followed by Canada (40%), India (36%) and Japan (34%).
Karen Penney, UK Head of Payments from Western Union explains: “UK companies are always looking across the globe for new trading partners and ways to strengthen their supply chain. In fact, our survey found that price is the number one driver when companies are considering where to trade, which explains the look to the East.”
Currently, UK Government data shows that the EU is the UK’s largest trading partner, representing 44% of all UK exports and 53% of UK imports. The desire to forge new trade links outside the EU stretches right across the UK with business leaders nationwide identifying the EU as the main region they believe they will reduce trade with.
But as British businesses consider closer ties with alternative markets, Western Union’s data suggests there could be a worrying lack of understanding about the potential impact on companies’ bottom lines through currency fluctuations when trading with countries even as developed as China and India.
While almost all businesses (87%) understand the fluctuations between Sterling and the Euro, almost half don’t understand the currency fluctuations between the Pound and the Chinese Renminbi or Japanese Yen, and even more with the India Rupee (57%). “Businesses are used to trading with the EU or the US, but they have less experience in these markets, and generally don’t know much about the currency fluctuations in these regions,” explains Karen.
To help businesses protect their profits from currency fluctuations as they look to broaden their trading partners, Karen advises UK companies to find a “partner that you can work with and trust to develop a plan to mitigate risks, and then make sure you continue to review this plan on an ongoing basis.”
She adds that given “political uncertainty always causes volatility in FX markets, and companies are looking for good trading partners, they need to prepare themselves by considering every eventuality. This way, regardless of what happens in political discussions, they can mitigate their risk.”
(Source: Western Union)