Credit Management magazine May2017

TRADE TALK
EXPORT OPTIMISM
Lesley Batchelor OBE FCICM reports from the Institute of Export and
International Trade’s latest export survey, which shows high level of
optimism for global trade.
AS part of the Institute’s charitable
remit we regularly survey our
members to ask their views on
issues of the day. In our most recent
survey the issue we were most interested
in was ‘optimism’. We found that despite a
myriad of political risks – fears of a growing
protectionist agenda in the United States,
whether national elections across Europe will
upset the status quo, and Britain's potentially
fractious divorce proceedings from the
EU – the Export Optimism survey showed a
strong energy for growth, with 97 percent of
respondents expressing optimism for global
trade opportunities.
We set out an optimism ranking (out of
five) for opportunities in the main markets and
weighted the average. The greatest optimism
was for global trade and trade with the EU –
93 percent of respondents said they remain
optimistic for export opportunities in the EU.
Despite the protectionist rhetoric from
the White House since President Trump took
office, respondents expressed a moderate
level of optimism for trade opportunities in
the US.
Respondents showed caution for trade
opportunities with India and China, while 21
percent indicated that they saw no optimism
for opportunities in Russia – a view no doubt
affected by the economic and financial
sanctions imposed by the EU, the US and a
number of other countries – punishing Russia
for its aggression in Ukraine.
To provide a balance the survey also asked
how much trade businesses thought they
would lose when we leave the EU trading
bloc, and the results showed that 87 percent
of respondents thought there would be a
loss of trade. However, the majority thought
this loss would be less than 20 percent. 13
percent of respondents expressed confidence
that we would not lose any trade.
Despite these assertions uncertainty
surrounding Brexit remains, with early
indications of relocation to maintain
a competitive edge. One respondent
commented that ‘relocation to mainland
Europe will allow us to maintain and grow our
business with our nearest trading partners,
which is vital to our business going forward.’
This amount of change needs to have new
investment priorities, so we asked businesses
what their priorities would be for 2017; 30
percent are prioritising extending their markets
overseas.
Additionally, 19 percent are planning to
invest in marketing, 15 percent are looking
at developing new products, and a further
12 percent plan to invest in plant and/or
machinery or extend their premises.
In terms of opportunities for 2017, 54
percent of respondents stated that extending
of their markets overseas was the single
biggest opportunity for their company in 2017.
We asked whether businesses had
contingency plans and found two thirds (61
percent) of respondents do, mainly in terms
of foreign exchange risk, and just over half
(52 percent) have a plan for credit risk. While
half of respondents have a contingency plan
for cyber-attacks, only 30 percent have any
plans to avoid the risks involved with customs
compliance.
The importance of businesses managing
currency risk is a fundamental part of ensuring
profitability when trading in international
markets. Results indicate that 60 percent of
businesses have plans in place to manage
currency risk. This is significant but all
businesses need a plan in place to manage
this particular risk. In practice, learning to use
forward contracts and matching of currency
payables and receivables are the most
frequently used methods of managing currency
risk.
Members of the Institute have told us that
transactions outside EU are 90 million and rising
– almost overnight and assuming we continue
to keep our EU customers – to 300 million
transactions that are treated as international.
This means paperwork for traders and HMRC
border control-based issues may impact on
trading as vital border controls may, if we’re
not prepared, begin to impact on our delivery
timing. It is worth noting that best practice
has HMRC randomly checking four percent of
the cross border trade to ensure security and
veracity of loads – yet another factor for our
logistics planning.
As usual we too are optimistic, but repeat
our adopted mantra from Albert Einstein, ‘first
learn the rules of the game; then go out and
play it better than everyone else!’ Our courses
are seeing the busiest time yet and we urge you
to find out more about these issues and how it
may impact on your business. To quote another
famous man, Baden Powell, ‘be prepared!’
Lesley Batchelor OBE FCICM is Director General
of The Institute of Export and International Trade
The recognised standard
www.cicm.com May 2017
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