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50% of UK firms believe Brexit will Boost business

51% of UK businesses believe geopolitical tensions, including Brexit, will have a positive effect on their business in 2020, according to new research released today by trade finance provider Stenn.

The study, which spoke to 250 senior executives at medium-large sized businesses in the UK conducted prior to the December general election, revealed that despite the prolonged uncertainty, businesses remain upbeat with 29% believing this positive effect will be ‘significant’.

While it’s unlikely a UK-EU trade deal will be in place until the end of the year, 56% of firms believe their company’s import business will grow in 2020, on average by 9%.

Similarly, in terms of exporting services, 57% of UK firms believe revenue will grow this year, on average by 11%.

Breaking this down, 15% of firms believe their export business will grow 11-15% in revenue, and 11% expect a growth of between 21 and 25%.

“The UK is on the cusp of leaving the EU and as we edge closer to the January 31st exit date the country is in an unprecedented stage,” says Dr. Kerstin Braun, President of Stenn Group. “As 2019 was marked by business uncertainty, 2020 will be the year that companies forge ahead with new growth strategies.

Looking across industries, growth for imports and exports is felt highest across financial and professional services.

The study showed 29% of firms in this sector believe their import of services will grow up to 25% in revenue this year, and a further 20% believe it will grow 26-50%.

“The general election provided businesses with much needed clarity surrounding Brexit and it’s wholly encouraging that even prior to the result, businesses have been feeling positive about the impact it will have. Businesses have been given the assurance they need to plan ahead to a post-Brexit era,” says Braun.

When looking at exports, 30% of financial and professional services firms also believe their export business will grow up to 25% in revenue, and 27% predict it will grow 26-50%.

In the manufacturing industry, 41% of senior executives believe their import business will grow up to 25% this year, and 32% believe their export business will also grow between 1-25%.

By comparison, just 12% of wholesalers predict the same high growth of between 26-50% in their import business, and 15% expect equal growth in export. Wholesalers are divided on whether their export business will grow or shrink between 1-25% this year (both 27%).

“While a Brexit trade deal probably won’t be agreed until the end of the year, businesses largely remain confident that both their import and export business activity will grow in 2020,” says Braun. “We know UK firms are looking to non-EU markets.

According to government data, as of October, exports to non-EU countries were growing twice as fast than those to the bloc, largely driven in part by the US and China, with total trade with the USA surpassing £200 billion for the first time.

The UK’s non-EU export business grew by 4.2% in October, in comparison to a rise of 1.6% to EU member countries.

“Some of this rebound will be the result of the expected upswing in global trade, but we can strongly say that UK companies are ready to get back to business,” says Braun.

Source: Pound Sterling Live

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UK firms investing billions abroad because of Brexit

The UK government hopes that Brexit will make the UK a better place to do business, but new numbers from the Centre for Economic Performance (CEP) show that the opposite is happening. UK firms are voting with their money and offshoring new investments to the rest of the EU.

The study finds that the Brexit vote has led to a 12% increase in new foreign direct investment (FDI) projects by UK firms in EU countries, a total increase in foreign investment of £8.3bn. A no-deal Brexit would further accelerate the outflow of investment from the UK.

This is the first systematic, evidence-based analysis of how the Leave vote has affected outward investment by UK firms. The findings support anecdotal evidence that fears about Brexit are causing UK companies to move investments elsewhere in Europe.

The report, by CEP experts Holger Breinlich, Elsa Leromain, Dennis Novy and Thomas Sampson, found:

  • The Brexit vote has led to a 12% increase in the number of new investments by UK firms in EU countries.
  • The estimated increase totals £8.3bn (over the period between the referendum and September 2018). To the extent that increased investment in the EU would otherwise have taken place domestically, this represents lost investment for the UK.
  • The data show no evidence of a ‘Global Britain’ effect. There has not been an increase in investment by UK firms in OECD countries outside the EU.
  • Higher outward investment has been accompanied by lower investment into the UK from the EU. The referendum reduced the number of new EU investments in the UK by 11%, amounting to £3.5bn of lost investment. This illustrates how the UK is more exposed to the costs of Brexit than the EU.
  • The increase in UK investment in the EU comes entirely from higher investment by the services sector. Brexit has not affected foreign investment by UK manufacturing firms. This suggests that firms expect Brexit to increase trade barriers by more for services than for manufacturing, perhaps because the government has prioritised the interests of manufacturing over services in the Brexit negotiations by focusing on reducing customs frictions, while ruling out membership of the EU’s single market.

The report’s findings support the idea that UK firms are offshoring production to the EU because they expect Brexit to increase barriers to trade and migration, making the UK a less attractive place to do business.

Holger Breinlich said, “Our results show that Brexit has already led to an investment outflow from the UK of over £8bn.

“These outflows are likely to accelerate substantially in the event of a no-deal Brexit.”

Dennis Novy said, “The economic risk of Brexit is larger on the UK side of the Channel. British firms feel compelled to invest more in the EU but not the other way around.

“Combined with existing evidence that the Brexit vote has already affected the UK economy through lower real wages, slower GDP growth and fewer firms starting to export to the EU, the initial signs are that ‘Project Fear’ may turn out to have been ‘Project Reality’.”

Thomas Sampson said, “The data show that Brexit has made the UK a less attractive place to invest.

“Lower investment hurts the economy and means that UK workers are going to miss out on new job opportunities.”

Source: London Loves Business