Are businesses ready for a post-Brexit trade deal with China?

January 8, 2019
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With 29th March 2019 looming, and the government’s proposed Chequers plan ill-received for the European Union, it’s understandable that businesses are growing concerned. In fact, one report shows how less than a third of UK businesses have any sort of back-up plan in place, should the UK crash out of the EU with no deal.

While a no-deal scenario would be less than ideal, it would allow for the UK to freely forge new trade deals around the world. It would not affect trade with countries outside the European Union, which is precisely what the UK seems to be planning for with its Prime Minister having recently visited China for talks.

But is it beneficial for China to engage in trade talks with us? After all, in 2016, the UK imported £42.3bn worth of goods from China, but exported only £16.8bn to China in return. But then again, that’s not entirely proof that China wouldn’t increase its British exports demand if a trade deal was in place — the country is already hoping to widen its trade with The Belt and Road Initiative.

China’s Belt and Road Initiative would see the country building trade links on a huge scale around the world. The “belt” side of it roughly equates to the land connections it will build through railroads, and the “road” refers to a sea-route of trade. Essentially, China is building a new Silk Road, and 71 countries are already part of the project, including Russia and New Zealand.

But Business Insider UK reported a difference of opinion in regards to The Belt and Road Initiative. Where Prime Minster Theresa May has not pledged support to the project that she feels isn’t a guaranteed success, Chancellor Phillip Hammond expressed his support of it. This could, of course, change as the UK’s relationship with China evolves. In fact, we have already enjoyed success in China before Brexit has even resolved. At the start of 2018, during talks between the UK and China, the 20-year ban on British beef was lifted. The deal is purported to be worth £9bn to the UK.

In 1996, the EU placed a ban on the export of British beef in reaction to an outbreak of “mad cow disease”. It wasn’t until 2006 that the EU lifted the ban, but other countries chose to retain their ban on the product, including China.
What British products do Chinese consumers most want? What markets and UK businesses could, potentially, fare well with Chinese consumers? According the Telegraph, top British exports the Chinese enjoy are:

• British cars
• Burberry, and other designer labels
• Scotch whisky
• Scottish salmon

Though China is a huge market, brands big and small can certainly find success there. The Creative Industries reported on the success of hairbrush and haircare brand Tangle Teezer over in China. Tangle Teezer’s International Managing Director, Gemma Clarke, confirmed in the article that China became its second biggest sales market in only 3 years trading there. The success is attributed to a Tangle Teezer product being bought by a Chinese model, whose social media influence saw the brand being highlighted to her many followers. China loves its online shopping, so influencers should not be overlooked when planning to cater to the Chinese market.

The right product, and the right approach, can do very well in China. At the very least, firms need to plan for the eventual shake-up to the UK’s ties with the European market once Brexit comes into play, and time is running out to start building the foundations. This small window of golden opportunity has been highlighted by Rebecca De Cicco in regards to the UK’s construction industry in particular. The director of Digital Node outlined how 70% of buildings over 200 metres tall completed in 2017 were built in China, and so the country is increasingly interested in building information management software and crowd simulation. The use of British construction software has already proved its value to the Chinese construction sector in Beijing’s new airport, the Beijing Daxing International. Projected to see 45 million passengers a year, the airport’s construction has benefited from crowd simulation software provided by UK structure analysis software experts, Oasys. The software alerted the construction company and designers to any potential bottlenecks, congestion problems, or other inefficiencies.

The Business Magazine reported how businesses in general should approach the Chinese market. As with any overseas market, the magazine advises companies to consider the culture of the country they are trading with; in this case, explore China’s culture. The general consensus is to be aware that what works in the UK may not work in China’s business ground, and as relationships can take a long time to build, jeopardising them with an ill-placed comment or miscommunication can slow that pace even further.

UK businesses need to be ready for the result of Brexit. Whether or not we retain trade deals with the EU, and to what to degree, the wider world is coming to the UK. Will it be a great opportunity for businesses, as some predict?

Sources:

https://www.bbc.co.uk/news/uk-45047874
https://www.bbc.co.uk/news/uk-45112872
https://metro.co.uk/2018/02/05/no-deal-brexit-7288751/
https://www.bbc.co.uk/news/uk-42821084
http://uk.businessinsider.com/what-is-belt-and-road-china-infrastructure-project-2018-1
http://uk.businessinsider.com/what-is-belt-and-road-china-infrastructure-project-2018-1/#it-consists-of-two-parts-the-belt-which-recreates-an-old-silk-road-land-route-and-the-road-which-is-not-actually-a-road-but-a-route-through-various-oceans-2
http://news.bbc.co.uk/1/hi/uk/4785610.stm
https://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8504445/Made-in-Britain-loved-in-China.html
http://www.thecreativeindustries.co.uk/uk-creative-overview/news-and-views/news-uk-firms-successfully-target-the-new-chinese-consumer
http://www.growthbusiness.co.uk/brexit-means-uk-business-china-europe-says-expert-2553464/
http://www.bimplus.co.uk/news/taking-our-bim-expertise-china/

Beijing Daxing International

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