Post Brexit Focus – Burgeoning Export Markets

A number of countries are enjoying population and economic growth at the moment, creating new markets for UK exports. In the run up to, and in the aftermath of Brexit, businesses that are trading these markets will become more attractive to companies looking to expand exports.

Some of these countries, like Pakistan, Malaysia, Bangladesh and Egypt may not be immediately obvious regions on which to focus export expansion efforts, but should be ignored at your peril. As Brexit negotiations continue, there will be free trade deals struck with other countries, countries that will soon be very important for UK exporters.

One of the outcomes of this is that there will be ready buyers for any business that has customers in one or more of these countries; or that has supply chains already set up in these regions.

Traditional export markets are shrinking

A new study carried out by the Financial Times, using a model created by Cluriak Consulting, found that, although the top five export market for the UK (the EU, the US, China, India and Canada) will remain the top markets in 2050, some markets, such as Japan and South Korea will drop way down the ranking. The problem in those countries is primarily an expected drop in population as a result of ageing.
In addition, there are other challenges facing smaller businesses looking to export abroad into markets like the US and China. The US's tax and regulatory differences from state to state make it a complex place to operate. China presents obstacles in the form of blocks on foreign companies sending emails to Chinese customers, limiting the marketing opportunities available to UK firm.

As the UK attempts to thrash out a deal with the EU and contemplates the importance of retaining its relationships with its other top export markets, UK trade negotiators will also be asking themselves where else they should be considering. The FT analysis has found that a number of export markets will move a considerable way up the ranking as increasingly important export markets for the UK between now and 2050. Pakistan is predicted to move from its current ranking of 14th most important market, to 11th, while Malaysia's placement will rise from 20th to 14th. Egypt will jump from 19th to 16th and Bangladesh will rise from 21st place to 17th.

There's little doubt that these countries will take a while to establish themselves as major markets for UK export businesses, but as a longer-term bet, it makes sense to start looking a little outside the box for your next business purchase.

Buy now, enjoy the rewards later

Businesses that already export to overseas markets are, understandably, concerned about the impact that Brexit will have. Buying up businesses that have already established access to the growing markets listed above could make sense. Purchasing businesses that allow you to start offering your products in Bangladesh and Pakistan, for example, or that enable you to offer your service to the growing numbers of wealthy Malaysians, could help your business survive in a post-Brexit environment.

Developing relationships and on-the-ground experience

To make the most of these flourishing new markets, you'll need to start building vital relationships, supply chain knowledge and local know-how as soon as possible. PricewaterhouseCooper's chief economist, John Hawksworth, explained the importance of on-the-ground experience when moving into new markets. He said: “While you can do a certain amount by email remotely, some things you have to do on the ground. You have to go there, build relationships with people, establish trust.”

That's not to say that technology has no role to play if you are considering purchasing businesses that will help you establish yourself in one of these burgeoning markets. Richclicks.co.uk, in their article: 'Cashing in on Brexit: Opportunities for UK Business'es, explained: “New Technologies bring to the economy the tools needed to globalise commercial activities, generate direct approaches and create strong connections between companies and customers worldwide.”
Some industries are especially suited to expanding into burgeoning markets

Manufacturing

A survey by manufacturers organisation EEF and insurer AIG has found that manufacturers are feeling positive about the future, despite Brexit. Some 40 per cent of companies were preparing for growth in 2018, while only 19 per cent were expecting their business to struggle. The weak pound is obviously helping to maintain the appeal of UK-manufactured products in key export markets, but new markets will also offer opportunity, according to EEF's chief executive, Stephen Phipson. He explained that the government needs to achieve a good deal with established markets and “...in tandem with this it also needs to crack on a pace with its industrial strategy. This will be vital in providing manufacturers with the confidence to invest in strategies to improve their productivity and enter new markets.”

Food and Drink

The Food and Drink Federation found that the export of branded good from the UK increased, on a year-on-year basis, by 14.3 per cent by the third quarter of 2017. Meanwhile, food and drink exports to the Philippines rose by a staggering 289 per cent. One firm that is enjoying the results of its efforts to expand into burgeoning markets is Wake Drinks. The chief executive officer of the active lifestyle drinks company, Alexander Buckley, said he decided to take the plunge when he realised the healthy demand for UK-made premium products in East Asia. He again underlined the importance of building relationships on the ground, which buying a business with established connections, customers and supply chain can help with. He stated: “Both face-to-face and online connections are valuable for a business looking to export. In-person meetings can provide a depth of understanding of what a client needs and tools such as LinkedIn are invaluable to keeping these contacts alive, especially when overcoming time-zone and distance barriers.”

Service industry

Services, and especially higher-end services, which the UK is known internationally for, account for 40 per cent of UK exports. As a result, service providers will do well to look towards burgeoning markets when deciding where to grow their business through buying a company. Simon Evenett, professor of economic trade and development at Switzerland's University of St Gallon, commented: “Traditionally, demand for services grows faster than income, so continued growth in emerging markets should create considerable commercial opportunities for UK service suppliers.”

And for those looking to sell...?

If you are looking to sell your business and want to attract those who may be looking to increase exports in countries like Malaysia, Bangladesh and Egypt, it might be wise to look into making some contacts in those countries to expedite the process for potential buyers. In a post-Brexit Britain, especially one with a limited deal with the EU and floundering relationships with the US, buyers could pay a premium for your firm if you have some access to burgeoning export markets.

And let's not forget...if the government manages to strike mutually favourable trade deals with these countries in anticipation of their growing importance to UK exports, British businesses may become more attractive to foreign buyers. Trade goes both ways and the future of UK exports and imports could be very different...and very lucrative for buyers and sellers with enough foresight to plan ahead.

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