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Preparing for a no-deal Brexit with trade deal with China

5th December 2018 Print

Even though the Brexit date of 29th March 2019 is drawing ever-closer, many businesses are still unsure about how to proceed in the event of a no-deal Brexit. One survey revealed that over two thirds of UK businesses are without a Brexit contingency plan should we end up leaving with no deal in place. 

Though a no-deal Brexit would be problematic in many ways, one benefit would be the freedom it would offer us to make trade deals with the rest of 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 China as interested in a UK trade deal as the UK is? 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. 

The initiative would see Asia building trade routes 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, according to Business Insider UK, there seems to be a clash of confidence in the Belt and Road by British officials; 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 outlook could change alongside the UK’s relationship with China changing. 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. The worldwide ban of British beef exports was originally put in place by the EU in 1996, in fear 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 else does the UK have that China wants? 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 

It’s not just larger companies that are in with a chance in the Chinese market. 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. 

It's all about having the right approach and the right product. 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.   

There’s a certain method to approaching the Chinese market, says the Business Magazine. 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. 

Brexit will soon be upon us, and businesses need to be ready. 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?