Despite the looming possibility of a no-deal Brexit, the majority of small and medium-sized UK businesses (53%) are preoccupied with other, global concerns, according to data released today by international payments company OFX.
OFX’s third annual survey of 500 senior SME decision-makers found that almost 1 in 5 (18%) consider a global economic slowdown to be the biggest threat to their business over the next year. For 19%, this synchronised slowing of the global economy has actively decreased their appetite for international trade.
However, most of the businesses surveyed said Brexit uncertainty has had no effect on their company’s international strategy (39%), in spite of the impact a no-deal could have on global trade.
On the whole, British businesses are still keen to engage in global trade, with almost half (48%) having increased overseas sales by an average of £45,000 in the last year. Meanwhile, 44% expect to start or increase international sales within the next twelve months.
The US loses its lustre
Though Brexit is having little impact on the global ambitions of British SMEs, other geopolitical issues continue to make their mark – and Trump’s ‘America first’ trade policies, in particular, are having a sizeable impact.
Small and medium-sized UK businesses have been put off the US by the threat of new barriers to the market. Interest in trading with the US fell again this year, with 1 in 5 businesses (21%) reporting a decreased appetite for UK-US trade in light of President Trump’s protectionist trade policies, which include the threat of new tariffs on billions of dollars’ worth of European goods.
This year’s findings represent a sustained depression in America’s popularity amongst UK exporters, as the US underperformed for the second year in a row. This stands in dramatic contrast to 2017, when respondents to OFX’s annual survey ranked the US as by far the most attractive market for international sales (62%).
Between 2017 and 2018, as Trump’s tough trade policies began to spook SMEs, the US dropped 53% in popularity and was overtaken by Western Europe as businesses’ favoured export market. In the last year, the number of UK SMEs trading with the US dropped by 26%.
UK businesses play it safe with the devil they know
The survey found that, with the threat of a global economic slowdown front of mind, British businesses are less willing to trade with non-neighbouring countries than they were last year. In the next twelve months, 24% fewer businesses intend to start trading with markets outside Europe than in 2018.
What’s more, 47% of respondents expect to start or increase sales to Western Europe in the next year, despite the fast-approaching Brexit deadline and uncertain future trading relationship.
For these businesses, the risk of a no-deal Brexit seems to be outweighed by the proximity and familiarity of Europe.
Sarah Webb, President, UK and Europe at OFX, said:
“While UK businesses are right to prepare themselves for the risks of a no-deal Brexit, this should not be the only issue that takes their attention right now. The knock-on effects of a global economic slowdown could end up posing a bigger challenge to global trade and the currency markets, so it’s comforting to see small to medium-sized businesses taking action to protect themselves so they can continue to trade with confidence.”
The UK goes global – and Northern Ireland stands out
This year’s results showed that international trade is flourishing right across the UK, not just within the London bubble.
While every region showed sustained engagement in global trade, the results from Northern Ireland were particularly striking given the imminent possibility of a hard border with the Republic of Ireland after Brexit:
- In the last year, the majority of Northern Irish SMEs (68%) increased their international sales to the tune of £52,440 on average.
- This represented the greatest year-on-year international sales increase of all UK regions, up 19% from 2018.
- More than a fifth of Northern Irish respondents began trading overseas in the past 12 months alone (22%).
- Despite uncertainty around the future of the border, 47% of Northern Irish SMEs named the Republic of Ireland as the most attractive market for international sales in the next year.
- This trend has been supported by OFX’s own customer behaviour. In the last year, OFX saw a 48% increase in pound-to-euro transfers from business clients based in Northern Ireland.
Meanwhile, after Greater London, businesses named Scotland and Northern Ireland as the best places in the UK to set up an internationally-trading business.
For 30%, Scotland’s main attraction is its access to major transport links, while respondents highlighted local employment costs and the availability of talent as the major draws in Northern Ireland.
Jake Trask, FX research director at OFX, said:
“As we approach the Brexit deadline, it’s encouraging to see such a show of confidence from small and medium-sized businesses right across the UK. That’s particularly true for Northern Ireland, where businesses have embraced cross-border trade despite ongoing uncertainty around the terms of Brexit.
“Despite escalating rhetoric amongst politicians, businesses are simply knuckling down and taking appropriate measures so they can continue to trade like it’s business as usual.”