Will UK international trade investment rise as economy strengthens - or not?

Imports and Exports | | MIC Customs Solutions |

The UK economy strengthened in 2015, but it remains unclear whether or not this will encourage more companies to invest in international trade.

As with much of the rest of the world, the UK economy has experienced some turbulent conditions since the global recession struck in 2008, which have naturally had a negative impact on international trading conditions in the last few years.

The road to recovery has been a long one for Britain, but 2015 was largely a year characterised by tentative growth and a gradually returning sense of confidence among UK companies as GDP edged upwards.

Businesses and commentators with an eye on the import and export market will therefore be looking for signs that this increased optimism will manifest in a proliferation of international trade opportunities; however, recent research has indicated that this may not be as clear-cut an issue as might be expected.

Although it is clear that the UK is, in many ways, unusually well-positioned in global business terms, the picture remains more mixed in terms of whether this means companies will be pursuing export opportunities with greater enthusiasm.

Economic trends bolstering UK export opportunities...

Grant Thornton's recent International Business Report offered an encouraging view on this, with the survey indicating that optimism amongst UK businesses rose in the final quarter of 2015 to 73 per cent - a six percentage point improvement compared to the previous quarter.

Within Europe, the UK was the second most optimistic economy, behind Ireland at 88 per cent, with export prospects rising 11 percentage points to 23 per cent, profitability expectations up 22 percentage points to 63 per cent, and the number of companies planning investment in plants and machinery up by 14 percentage points to 53 per cent.

It was noted that numerous challenges continue to exist, including question marks over the UK's relationship with the EU and numerous other major economies showing fragility, but even in spite of this there remains substantial opportunities for export-driven British businesses to exploit.

Robert Hannah, chief operating officer at Grant Thornton UK, said: "The slowdown in China in the latter part of 2015 in many ways signals an economic realignment, as the Chinese economy diversifies from commodities consumption to demanding more knowledge and service-based imports - an excellent opportunity for the UK's expertise.

"With British businesses anticipating an uptick in exports over the coming year, we can only hope their sights are set on such opportunities."

...but are UK businesses interested?

However, a separate study from KPMG has offered an indication that the current economic trends are unlikely to coincide with any major uptick in import and export activities.

The survey of 1,200 chief executive officers (CEOs) of businesses across ten countries showed that confidence in the UK economy continues to grow at the moment, but that international trade remains significantly down their list of priorities despite this.

It was observed that 47 per cent of global CEOs are looking to invest significant capital into geographic expansion outside of their home countries in 2016, yet this fell to 19 per cent among chief executives in the UK. This made investments beyond the domestic market the third most popular strategic priority for global CEOs, but only the eighth most important issue for British bosses.

Kevin Smith, chairman for KPMG in London, said: "British GDP remains roughly in level with that of the US while outperforming the rest of Europe so it is easy to see why British CEOs would choose to focus on a healthy home market - with the advantage of being a home player rather than pursue higher growth in international markets where there are greater risks of potential market instability."

However, it was also noted that conditions in fast-growing but currently depressed markets like China and Brazil may turn the corner in the next 12 to 24 months, meaning UK businesses could be missing out on these opportunities if they do not pay attention to them now.