Finding opportunities in an uncertain world
Inspiration
Key learnings
- More barriers to international trade have been erected over the last ten years than have been brought down.
- In the current environment, risk management and contingency planning have become very important.
The businesses that put the power in Northern Powerhouse have a long history of exporting pedigree, which is being well and truly tested by current economic headwinds. But in an uncertain world, international trade still has an essential role to play, spreading prosperity and business opportunity between countries. According to Sally Jones, UK Trade Strategy and Brexit Leader at EY, the key to unlocking the North’s exporting potential is for companies to plan ahead and take a balanced portfolio of risk.
Over the last decade, there have been five times as many barriers to global trade erected than have been brought down.
Couple that statistic with a global pandemic, supply chain disruption, war in Ukraine and a cost-of-living crisis, and it could be argued that the incentives for exporters to sell their goods and services overseas have just about disappeared.
But there are still pockets of opportunity out there, according to EY’s UK Trade Strategy and Brexit Leader, Sally Jones.
Sally’s team helps organisations to identify stumbling blocks that are preventing them from trading efficiently and then works to mitigate them and come up with solutions.
“We work with government, corporates, investors and anyone who has identified that there must be a better way of doing something,” she says.
Making the case for international trade
What encourages Sally in such a challenging climate for international trade is the underlying truth that free trade agreements have historically delivered net gains for all parties involved.
“Trade is not a zero-sum game and if you’re doing it right, which we did for 70 years post-WWII, it is of benefit to everybody,” she adds.
“We need to get people away from that very black and white model of economics and towards something much more real.”
In the midst of an energy crunch where many countries have found themselves painfully exposed to price swings in international markets, the reflex everywhere is towards self-sufficiency and protectionism.
The trouble with this response is that very few economies have the ability to produce all the goods and services they need.
Sally says: “China and the US are probably the only two economies in the world that are large enough where they could be entirely self-sufficient domestically if they chose to be.”
A better approach, therefore, could be what Sally describes as ‘friendshoring’ or trading with friendly economies.
She explains: “Friendshoring implies certain value standards but all I’m really talking about here is trading with liberal democracies.
“If we choose to expand our operations with companies and countries that we trust rather than just the companies and countries that are cheapest, then that is a more sustainable way of doing things.”
Facing up to uncertainty
Despite the ongoing need for international trade and strong relationships between countries, it’s fair to say that exporters are still finding themselves at the sharp end of global market forces.
Sally says: “If you were to put the challenges facing exporters under one broad umbrella, it would be uncertainty.
“I think most businesses can cope with most things if they have a decent run up to it.
“But what really kills business is fast, unforeseen change and right now there are things that we couldn’t possibly foresee like the war in Ukraine.”
One way to face up to this uncertainty is to identify any challenges you can predict and plan accordingly for how you’re going to deal with them.
For example, supply chain disruption is a common challenge that is now well understood following over two years of COVID-19 interruptions to trade flows.
Sally says: “Exporters should be building more resilience into their supply chains and we’re definitely seeing a trend away from just in time supply chains towards just in case supply chains, which is about multiple sources of supply in multiple geographies.
“It’s about being realistic and taking a balanced portfolio of risks and looking at what steps you can take to mitigate those risks.”
Where to find support
Another important consideration for exporters is that they don’t have to face all these challenges on their own.
Sally says: “Exporters can get an enormous amount of help from the likes of Department for Business and Trade and UK Export Finance – putting them in touch with experienced operators and de-risking the process.
“Britain also has embassies all around the world and they are an absolute wealth of information on the ground.”
Exporters can also get in touch with Sally and the team at EY who are always on the hunt for ambitious companies looking to expand overseas.
“The businesses I like to work with best of all are the ones that have maybe done some initial exporting, so they’ve got a taste for the international market,” she says.
“Give me a fast-growing SME over a global monolith any day of the week because they’ve got a real opportunity to make a difference.”
The future of international trade
Looking ahead to what promises to be a demanding 12 to 18 months for exporters, the key for Sally is to find a way back to the kind of free and open international markets that delivered such widespread prosperity over the last 70 years.
She says: “I would love to see a reversal of the current trend, which is towards protectionism.
“To do that, we need to win back the hearts and minds of governments around the world to the notion that trade is net positive.
“For exporters, there are still huge pockets of opportunity out there.”
Next steps...
- Get started with exporting by reading our guide to trading internationally.
- Contact Sally and EY's trade strategy team to find out how they could help you with exporting.