North East England Chamber of Commerce comment on trade statistics

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Trade statistics released today highlight the challenges UK exporters have faced and continue to face in 2020, as Britain’s short-lived trade surplus ended. In September 2020, UK imports increased by £3.6bn to £49.2bn while exports flatlined at £48.5bn – a monthly deficit of £600m. This 8.0% increase in imports can likely be sourced to an increase in demand as we continued to live in loosened COVID-19 restrictions. The statistics for November 2020, when released, will likely show a dip in imports but not quite as drastic as we saw over summer.

The third quarter of 2020 (July-September) saw a similar story, with growing imports outstripping export growth. Imports grew £17.3bn (14.0%) on the previous quarter to reach a total of £140.5bn, whereas UK exports grew only £13.8bn (10.6%) to £144.7bn. This left a total trade surplus, excluding precious metals, of £4.2bn – a decrease of £3.4bn on the second quarter of 2020.

UK service exports, the longstanding backbone of the national economy actually fell by £0.3bn while imports grew £0.7bn highlighting that while business conditions have improved from the middle of the first lockdown, firms across the whole range of the economy still face significant challenges.

A significant portion of quarterly trade growth has come from an increase in machinery & transport and manufacturing products imports and exports. As COVID restrictions loosened, the demand for road vehicles has rebounded. Imports and exports of road vehicles increased £5.4bn and £4.7bn respectively in Q3 2020 as dealerships reopened. Exports of road vehicles to non-EU nations increased by 171.8% (£3.1bn), while exports to EU countries increased 114% (£1.7bn). In September 2020 there were 328,041 new car registrations in the UK. This is 4.4% below the same month in 2019, but a marked improvement from the May 2020 low point where registrations were 89% below the previous May.

When we look at the annual statistics (September 2019 – September 2020) we begin to see the extend to which COVID-19 has impacted international trade. UK exports in the 12 months to September 2020 were worth £602.4bn, a decrease of £75.1bn or 11.1%. Imports paint a similar picture with a total value in the same period of £597.2bn, a fall of £111bn or 15.7%. This left the total trade balance for the year at £5.2bn.

As UK exporters still face significant challenges to return to pre-COVID levels of activity, it is important to acknowledge the additional challenges they are set to face. The second lockdown in November is likely to take a toll on both importers and exporters and when it ends businesses will have less than a month until the end of the transition period. Government must be realistic about its expectations of importers and exporters, who have already faced the toughest year in living memory, and their ability to adapt to huge changes in the trading relations between the UK and the EU without severe disturbances. Government’s first priority when it comes to international trade must be to secure a deal with the EU that supports traders and minimises disturbances, and then provide the financial support and guidance that businesses will need as we move into 2021.

Two new roles to boost North East exporters

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Two specialist advisers have been appointed by the Department for International Trade and Industry to encourage more North East businesses to export in growing sectors around the world.

Len Taylor, from Ingleby Barwick, is a specialist in offshore wind and renewables and will work with companies to help increase their international competitiveness as well as support overall growth in export trade.

He was a former CEO of Whessoe in Darlington, before that Head of UK Engineering and Projects for DONG Energy (now Orsted). He has also held the Business Unit Director role at AMEC plc where he grew a Clean Energy business.

In his role he will promote the range of opportunities for offshore companies through webinars and advice sessions as well as develop a strategic approach to the region’s offshore offer for overseas markets. He will also grow a network of companies in this sector across the Northern Powerhouse area, to help identify mutually beneficial areas of interest.

Joining him is Scott Duncan from Newcastle who will specialise in the North East’s defence and security sector.

His role will be aimed at helping to increase companies in the sector’s competitiveness and look for opportunities for growth in international markets.  He will also develop a strategic plan for the defence and security sector, which will identify regional strengths, weaknesses, opportunities and threats, as well as develop a roadmap to increase North East exports to the sector

He has worked in various business support roles across the North East having worked for One NorthEast the Regional Development Agency, as well as sector skills councils and more recently as Regional Membership Manager for Make UK (formerly EEF). Whilst at EEF he spent time working within their NDI membership division which delivers supply chain sourcing and business development services to businesses across the defence and security sectors.

North East England Chamber of Commerce is the current Delivery Partner for the Department for International Trade services in the region. Julie Underwood, Executive Director of International Trade at the North East England Chamber of Commerce said: “The Prime Minister’s announcement about increased investment in offshore energy in particular, is extremely timely for these new roles. These sector specialists will help to attract investment to our region and, importantly, ensure our tremendous offshore and defence companies are able to maximise any opportunity to trade overseas.

“The overarching aim of the appointments is that they will help us better understand the breadth and depth of what we have to offer across the wider North and what we need to do to make sure our capabilities are recognised nationally and internationally.”

Norwegian Ambassador addresses Chamber global members

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North East businesses which trade internationally heard at first hand the opportunities to develop closer links with Norway from the country’s Ambassador.

Speaking at a North East England Chamber of Commerce Global members’ virtual lunch, H.E. Wegger Strommen stressed the UK was a key market for his country with 20% of Norwegian goods coming across the North Sea.

The ambassador also outlined a breakdown of his country’s primary export sectors, with the main one being oil and gas and then the fishing industry. This reliance on fisheries isin part due to the Norway’s length of coastline, 90% of Norwegians living by the sea and a factor in the long-standing close economic collaboration with the UK.

In 2019, the North East did £421m worth of trade with Norway, sharing in each other’s primary products, cars from the North East, petroleum from Norway. However, the development of the North Sea power link andDogger Bank Offshore Windfarmwill deliver more opportunities between us.

He also touched on Brexit and Norway’s experience of international trade as it is outside the EU. The Ambassador noted that they have negotiated new market access and consultations on priority areas, like fish, and the UK should identify its own priority sectors.

His speech explained therewere 16k British people in Norway and said they were an important part of their workforce and explained there were also mutual strong links withNorwegian nationals in the UK.

In his view the future links with the North East would remain strong, “If you like someone you are already in business. We make our living on the sea which we share with the North East region. What is good for you, is good for us.

He said: “We have a history with the North East that stretches back over 1,000 years and see the UK as a strong ally and neighbour. The sea binds people together, in the olden days in Norway the only way to see each other was often by boat. Sometimes people describe the sea as a divider but there is usually a much easier way to see someone via a boat than over a mountain range!”

The Ambassador also talked about the importance of Norwegian students attending our North East Universities as they very often returned to do business in the North East as a result.

As a final note he added how much this region was a magnet for Norwegian tourists who came for sporting, musical and entertainment events.

The Chamber global lunch was held in association with the Norwegian British Chamber of Commerce, through the Global Chamber Network.

Looking to the (far) North East

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SUNDERLAND and the North East England Chamber of Commerce have renewed pledges to develop trade links with the Chinese city of Harbin.

The renewal follows a Memorandum of Understanding between the North East England Chamber and Harbin’s own Chamber of Commerce that was first agreed in 2009.

Agreed at a virtual conference on investment, the update was signed virtually by James Ramsbotham CBE, Chief Executive Officer, of the North East Chamber of Commerce and Xu Wei of the Harbin Chamber of Commerce and Industry.

Harbin, which is in North East China, is a metropolitan area of nearly 11 million people and the country’s eighth largest city.

Sunderland and Harbin first signed their sister cities Friendship Agreement in Harbin in 2009 and the North East England Chamber of Commerce signed their first agreement with Harbin counterparts at the same time.

Since the original signing, Sunderland has developed strong educational, cultural and health links with Harbin and many joint projects have been delivered. A number of companies have also explored business opportunities through the partnership.

Regionally, there was trade valued at £1.5bn between China and the North East last year, and this had grown by a fifth (22 per cent) from £1.26bn in 2014. The top 2019 regional export was £50m in non-ferrous metals (such as zinc, aluminum, copper) and biggest import was £150m of electrical machinery and appliances.

In addressing the conference, Mr Ramsbotham said: “North East England is the most pre-eminent exporting region of the UK, trading with all parts of the world.

“The partnership between Sunderland and Harbin offers great opportunities to build relationships between businesses in North East England and North East China and given the similarities between our two economies there are many synergies to explore and maximise.

“We look forward to working even harder to build upon this potential.”

The virtual investment conference follows an online meeting last month with Sunderland City Council’s Leader, Councillor Graeme Miller, the council’s Chief Executive Patrick Melia and Harbin Mayor Sun Zhe where they looked at priorities for future collaboration.

Cllr Miller said: “It’s important that Sunderland and the North East region continue to look to global economic opportunities. We are significant exporters here and we receive significant amounts of inward international investment.

“Overseas-headquartered businesses employ around one-in-four of Sunderland’s workers and in the last financial year those businesses brought over £300m of capital investment to our city.

“Therefore, it’s only right that we continually update and develop our links across the world. As friendships have grown with Harbin, our links have strengthened and in the last 12 months our public health links have really grown. Now it’s time to look at our trading links.”

Harbin’s Mayor Mr Zhe added: “Recently, we have witnessed increasing achievements and fruitful results in Harbin-Europe cooperation. Concrete cooperation between Harbin and Sunderland has been achieved in the fields of healthcare and education.

“Currently, with the situation of epidemic prevention turning better, the economy of Harbin is recovering rapidly, which lays a solid foundation for Harbin to strengthen cooperation with European countries.”

​The UK’s Global Trade Tariff

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The UK Government has announced a range of changes in its new Global Tariff policy to take effect from the 1st January 2021. (19th May 2020)

The Department for International Trade has announced its new UK Global Tariff plan on leaving the European Union. This tariff will apply for the trade in goods and markets which the UK does not have a trade agreement with.

The Global Tariff aims to simplify tariffs, rounding tariff values to the nearest whole number, .25 or 5%. This also includes the removal of “nuisance tariffs” (those under 2%), meaning that 60% of goods will be tariff free- up from 47%.

Protective measures will remain on goods like agriculture, cars and ceramics. This new strategy is aimed at consumers and UK supply chains, who can import cheaper material or goods for consumption.

This is a change from the previous Government, under Theresa May, which planned to eliminate all import tariffs which caused significant concern that the UK would be a “dumping ground” for cheap imports, and cripple domestic industry.

The notice does note that the practice will reduce the burden of “red tape”, however, it is definitely worth noting that without comprehensive trade deals, including market alignments, then the burden of administration will go up.

The reduction or removal of tariffs does not mean the removal of customs documentation. This may also complicate moving goods in Ireland, as Sam Marc Lowe pointed out, due to their new customs arrangement, meaning a 5.2% good there, is 5% here….

However, it will at least offer some clarity for business on baseline scenarios for global trade and planning.

Check your Global Tariff, with the DIT Global Tariff Tool: https://www.gov.uk/check-tariffs-1-january-2021

UK Customs Border Update – Return of Simplified Borders

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As the UK leaves the European Union, it will be forming its own, new, Custom Borders. Government has announced its strategy to help business adapt to the new trading changes.

Last week the UK officially confirmed to the EU negotiating team that it will not be asking for an extension to the Transition Period by July 1st, the deadline to do so. This means that come January 1st 2021, the UK will introduce a new customs and border regime. This means all goods moving across the UK border will be subject to documents, tariffs, and where necessary, checks.

HMRC estimates this will result in an annual increase of 50 million documents to over 300m documents- a two-pronged issue as HMRC tries to develop more capacity and business with no knowledge of the customs processes will have to learn, and fast, or face additional time, costs and even legal penalties

However, Government has announced new a policy aimed to help business understand and adapt to the new border changes, similar to “Transitional Simplified Procedures”, the May Government’s solution to No Deal Brexit borders.

The UK Government plans to gradually phase in UK Customs Borders over a six-month period. From January 1st, only “controlled goods”, like alcohol and tobacco, and relevant health checks, such as live animals, will be subject to full customs and tariff proceedings, while “standard” imports will have up to six months to complete documents and pay tariffs.

From the Spring, health and animal-origin goods will be subject to the border controls, with pre-notification of imports required by the authorities.

Then from July all goods will be subject to documentation and tariffs from the point of entry, dependent on the outcomes of all these new Trade Deals… ahem.

(The Government has already announced its “Global Tariff” for all goods not covered by a Trade Deal, Click Here For More).

While almost all imports will be able to flow freely into the UK until July, business must keep a proper and secure record of their activity during this period for VAT payments and for HMRC retrospective checking.

While the full proposal is still to be announced, there are certain challenges to this system. First, and practically, how will freight be managed at the port to identify which goods can pass quickly over the border, and which require further checks. What does this mean for mixed freight shipping?

Port of Dover did trial a coloured lane system for traffic flows, but this may not be an option for tighter confined ports, however, some ports may benefit from longer shipping lanes, say to the North East, to identify and clear goods on deck, and manage flows before they even leave the carrier.

The other side will be the new administrative burden on businesses to complete, store and maintain compliant customs documentation, and navigating the needs of their goods. It is important that the new system is clearly communicated by HMRC to business, and they are supported in learning and adapting to it.

Finally, this will only be goods coming into the UK, goods exported to Europe and beyond will be subject to at the border checks and payments. It is therefore vital that global business is reviewing and understanding their supply chain models to be best equipped for January 1st, 2021.

The Chamber will be running online award training courses to help business comply with the requirements of International Trade, and also offers an online module course. Please contact [email protected] if you would like to find out more.

Preparing for our future relationship with the EU

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Recorded on the 2nd July 2020

The North East England Chamber of Commerce, as part of a worldwide network of Chambers, is able to bring you an exclusive and unique webinar series, in assoc. with the British Chamber of Commerce in the EU & Belgium.

Our CEO, James Ramsbotham CBE was joined by Daniel Dalton, a former MEP and now CEO, British Chamber of Commerce in the EU & Belgium. Daniel’s team operate in Brussels and at the heart of the EU, with a special working group examining the UK-EU future relationship, so are in a great position to share what’s going on, for the benefit of our members.

This webinar was organised with the British Chamber of Commerce in Belgium & EU.

Global Clinic: COVID-19 and International Trade

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Recorded on the 1st May 2020

We were joined by expert speakers from the legal, VAT and Currency Exchange arena for an update on the challenges and potential solutions in their field, as well as a look forward for the “New Normal”.

Each speaker delivered their 10-15 minute update, followed by a Q&A session for members, as well as an update from the Chamber policy team on current guidance and support along side some of the work the Chamber is doing on members behalf.

Speakers:

  • Andrew Needham, VAT Associate, Haines Watts
  • Grant Murray, Regional Manager (North), XE Finance
  • Damien Charlton, Partner – Company & Commerical, Ward Hadaway