The Future of British Trade with Europe: A Light at the End of the Chunnel?
With Article 50 having been triggered recently by UK Prime Minister Theresa May, Brexit is now actually happening and calls for a revote can be forgotten. The negotiations are officially underway, and guess what, uncertainty still lingers in the air like a dense, London fog. So, what lies ahead for British business owners?
Building bridges by building tunnels
When the Channel Tunnel connecting Folkestone, England and Coquelles, France was opened in 1994, it was seen as a symbol of unity between the UK and mainland Europe. Though the idea of connecting the two landmasses was rejected for years by the British during the height of their empire, minds were changed as the new economic realities of the world started to take shape after World War II.
Today, there is no question as to the importance of such a tunnel. According to the Eurotunnel Group, 25% of trade in goods between the UK and Europe goes through the Channel Tunnel, which equals a total value of £91.4bn per year. On top of that, an average of 57,000 passengers use the tunnel every day. Those numbers are sure to impress any stat-geek, but how will these numbers change in the future? No one knows for sure, but one thing is for sure- it’s not going to change overnight.
Who’s buying British?
When we’re talking about almost a £100 billion, it’s hard to fathom what those numbers actually mean. Let’s break down some of those export statistics to see what they really mean for business owners in the UK and consumers around Europe.
Europeans actually love British goods. A survey carried out by the International Post Corporation in January 2017 gives us some great insights as to who is buying British goods. When considering the major European markets, the UK ranks in the top 5 for each of these countries as destinations for online shoppers. In fact, besides Switzerland, the UK can be found in the top 3 in those markets, with Ireland (61%) and Italy (24%) topping the lists. Even after the vote, people still seem to be buying British, but why?
The fact that the sterling dropped in value against the euro definitely has something to do with it. Though the average Briton wasn’t too thrilled at the thought of their currency dropping to its lowest value in almost 30 years, exporters in the UK saw a boost in sales as international shoppers jumped at the chance to buy British goods at what must have seemed like Black Friday prices (though I’m assuming Worcester sauce probably wasn’t the number one export).
If you're an online retailer, you’re probably still confused as to what to do next. Considering that we’re most likely at least two years away from reaching a solution to all these open questions, UK exporters seem to be continuing with business as usual while keeping Brexit in the back of their minds.
This might be the best course of action right now. Considering that experts are predicting a steady sterling from this point forward, British exports should continue to be popular around the world, especially in Europe, as the single market still reigns (for now). For small businesses, this might actually be a great opportunity for growth.
If the UK aims to follow the “Norway model”, continued participation in the single market might not be that far-fetched. If access to the single market is not possible, then taking advantage of membership for the next two years isn’t a bad strategy for growing businesses either.
Confidence in the future?
Though uncertainty might be the word-of-the-year as far as economists are concerned, it seems that UK business owners and UK consumers might have a difference of opinion here. When we look at consumer confidence in the UK, the trend was heading downwards in the months leading up to the vote, and then took a nose dive directly following the vote. In the months since the vote, the numbers have recovered a bit, but are still in the negative.
However, if we look at how British business owners see the future, it seems a bit brighter. Cross-border e-commerce specialist, Global-e, recently surveyed 250 British retail decision makers. Their findings reveal that almost half (48%) of those surveyed believe that the British economy will weaken once article 50 is triggered. However, 62% of them are also confident or very confident that their businesses will flourish. It seems that British business owners see at least one thing clearly: the sterling’s current value is good for exporters.
What can a growing online business do?
With so many questions still up in the air, what is a small business owner to do? Expanding your business abroad is hard work, but can really be worth it if done correctly. If you want to take advantage of the single market for now, here are just some of things to consider.
- Protect your business from exchange rates - Banks often add hidden fees to their exchange rates, so finding a transparent payment service provider can bring lots of advantages to business owners. With a variety of options, you should consider that a good institution will not overcharge you with hidden fees. Many of them offer a lock-in price which would allow you to use a fixed exchange rate for future transactions.
- Build your reputation as a trustworthy shop - Building your online reputation is imperative. The finest advertising schools in the world will tell you the same thing: Word-of-mouth will always be the best form of advertising. That’s why reviews have become so popular these days. A lot of review providers have great platforms, but one thing to keep in mind is that the review system should be a closed system. This means that fake reviews are prevented and only real-life and verified customers can provide reviews.Secondly, you should consider getting a trustmark (or quality seal) to strengthen your credibility. Some consumers really take these trustmarks as symbols of good business practices. Elaboratum recently surveyed the German market and results revealed that 42% of shoppers actively look for a trustmark when shopping online, and 63% of shoppers felt safer when purchasing from a website displaying one. Considering that Germany is a strong economy and the largest market on the mainland, this is something to strongly consider.
- Keep your legal issues in check - Entering any new market has its legal challenges, even if it is within the EU. Sure, many laws are standardised across Europe, but there are some national regulations to think about when selling abroad. In Germany, the so called “Abmahnung” is a big threat for online businesses. An Abmahnung, in competition law, is a legal notice that can be issued from a competitor or other legitimate associations ahead of any court proceedings in order to avoid going to court. They can be costly and even more costly if the contractual penalty is evoked. Making sure you’ve crossed all your T’s and dotted your I’s is imperative in some markets more than others, and investing in good legal support can save you thousands.
The drama and uncertainty behind Brexit has an entire continent (and beyond) at the edge of their seats like an episode of EastEnders (that’s the Young and the Restless for you Americans). However, as Brexit is sure to take a few years to happen, expanding your business shouldn’t be put on hold. As news trickles down to the public during negotiations, adjustments will surely have to be made, but stagnation is not the path to growth. If you’re not moving forward, you’re moving backwards.
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