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Winning business: changing markets

Internationalism has taken something of a hammering over the past 18 months, but constructive global citizenship should always be at its core. An internationalist foreign policy for developed nations would use their economic and technological wealth to promote a better and more prosperous world for everyone.

Whatever social caveats might have been mooted in global political discourse in recent times should not detract from the overarching benefits that a more connected world can offer to businesses. Here at Western Business Union Solutions, we operate with the ethos of opportunity. We are the facilitators; we want to build bridges, not walls.

Money, whatever spin you put on it, is ultimately what makes the world go round. Ensuring the fluidity of cash flow, therefore, should be a priority for any government or business. Cash flow was cited as the number-one concern and threat to growth facing UK companies in 2017. Currency volatility, meanwhile, is another worry, ahead of credit availability, regulation and even competitors. Late payment and debt recovery are also anxieties, and the time spent on payment processes across the UK’s micro, SME and lower corporate institutions ranges between 12 and 50 hours a week. Streamlining money matters, then, is surely crucial to boosting productivity.

Against the backdrop of Brexit, WUBS recognises the pressing need for the UK to maintain its role as a world leader, lest it be forgotten as a major player on the global economic scene. Almost half of all UK businesses expect growth in their international activity over the next six to 12 months, and so, outside of hope for a favourable set of terms post-Article 50, WUBS is committed to offering support with the necessary resources from both the private and the public sector. This will include intellectual/human capital, and financial, technological and information resources that SMEs especially will need to navigate these turbulent times.

Alongside a more nuanced approach to internationalism generally, the need for a deeper understanding of technology’s impact on businesses’ bottom line is paramount. There has never been a more important time to embrace and adopt technology and ensure UK firms are not standing on the sidelines as their revenues are reduced. Technological obsolescence, that is to say competition brought about by digitisation or innovation, poses a significant risk to lower corporate organisations in particular, with 25.5 per cent of their revenue threatened by competitors advancing ahead of them.

WUBS asks whether businesses are being taught to use technology effectively enough. Websites are admittedly commonplace nowadays, but how many of those cater for e-commerce? There is perhaps a potential role for government here in introducing set standards. In Germany, for example, it is compulsory for businesses to join their local chamber of commerce.

The full scale of the economic side effects of Brexit is yet to be confirmed, and it is for that reason that the UK must be prepared for either a hard or soft eventuality, a distinction plausibly defined by the country’s access or lack of access to the single market. In either case, the issue of exporting is suddenly thrown into sharper focus.

As the British pound moves in favour of exporters, a larger percentage of overall UK business is being derived from exports, with over a quarter (27.6 per cent) of current business revenue coming from these, a hike of 18.5 per cent on two years previously. Strong forward dated guidance will add to this share: 53.3 per cent of UK businesses expect to increase their proportion of export earnings relative to their overall revenue by roughly 8.3 per cent.

Unsurprisingly, exports make up a larger slice of the pie for the bigger UK corporations, with companies turning over between £20m and £100m per year indicating that a substantial 37.5 per cent of their revenue is owed to trading overseas. Though this figure has stayed relatively static for most larger corporations over the past year, 53.3 per cent anticipate the export proportion of their business to increase over the next year. As exports rise in importance and account for bigger proportions of UK businesses’ revenue, the roles of government policy and financial providers must reflect that, with frameworks for ongoing support and education.

Over 80 per cent of UK businesses have highlighted their renewed focus on international vendors and supply chains in the light of the country’s decision to leave the European Union, with a further 12.5 per cent saying that there would be considerable focus placed on their vendors going forward, emphasising the shift towards foreign partnerships and alliances over having a direct presence abroad. Given that the crux of UK business is service-led these days, rather than rooted in raw materials, striking the right partnerships, economically and technologically, is tantamount to a self-sustaining UK.

While the Brexit vote has understandably dominated the rhetoric surrounding the UK’s economic future, it would be disingenuous to suggest that this can only be discussed within the context of the EU. Indeed, the opportunistic largesse of the global economy was one of the key arguments of the Leave campaign. Apart from the historically developed countries outside the EU, China, India and Brazil represent three other potential trading corridors; and fostering fluid and positive relationships with these countries will no doubt be central to a post-Brexit economy.

In order to build those positive relationships, WUBS, at the forefront of any such possibility, urges the government and industry alike to nurture and develop their SMEs. It is they that form the spine of the economy, as they number the most. If empowered properly, they will achieve the growth that the UK requires.

Lord Price, Trade Policy Minister

“Trade is at the heart of government as we look to champion a liberal trade agenda that boosts our prosperity and helps UK businesses take advantage of new markets around the world. “Government is not acting in isolation, and we are speaking regularly to businesses large and small to ensure we give them the support they need to seize new opportunities – support like the new Exporting is GREAT hub, which gives businesses access to advice, financial and regulatory support and live contract opportunities.”

Quote taken from a New Statesman feature in print 17th Feb 2017

business.westernunion.co.uk

EDGE platform: business.westernunion.co.uk/ wuedge

Twitter: @WUBusiness

White paper: business.westernunion.co.uk/ docs/changing-markets.pdf

Western Union Business Solutions is an official partner of Exporting is GREAT.

Kerry Agiasotis is president of Western Union Business Solutions.

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The Brexit Beartraps, #2: Could dropping out of the open skies agreement cancel your holiday?

Flying to Europe is about to get a lot more difficult.

So what is it this time, eh? Brexit is going to wipe out every banana planet on the entire planet? Brexit will get the Last Night of the Proms cancelled? Brexit will bring about World War Three?

To be honest, I think we’re pretty well covered already on that last score, but no, this week it’s nothing so terrifying. It’s just that Brexit might get your holiday cancelled.

What are you blithering about now?

Well, only if you want to holiday in Europe, I suppose. If you’re going to Blackpool you’ll be fine. Or Pakistan, according to some people...

You’re making this up.

I’m honestly not, though we can’t entirely rule out the possibility somebody is. Last month Michael O’Leary, the Ryanair boss who attracts headlines the way certain other things attract flies, warned that, “There is a real prospect... that there are going to be no flights between the UK and Europe for a period of weeks, months beyond March 2019... We will be cancelling people’s holidays for summer of 2019.”

He’s just trying to block Brexit, the bloody saboteur.

Well, yes, he’s been quite explicit about that, and says we should just ignore the referendum result. Honestly, he’s so Remainiac he makes me look like Dan Hannan.

But he’s not wrong that there are issues: please fasten your seatbelt, and brace yourself for some turbulence.

Not so long ago, aviation was a very national sort of a business: many of the big airports were owned by nation states, and the airline industry was dominated by the state-backed national flag carriers (British Airways, Air France and so on). Since governments set airline regulations too, that meant those airlines were given all sorts of competitive advantages in their own country, and pretty much everyone faced barriers to entry in others. 

The EU changed all that. Since 1994, the European Single Aviation Market (ESAM) has allowed free movement of people and cargo; established common rules over safety, security, the environment and so on; and ensured fair competition between European airlines. It also means that an AOC – an Air Operator Certificate, the bit of paper an airline needs to fly – from any European country would be enough to operate in all of them. 

Do we really need all these acronyms?

No, alas, we need more of them. There’s also ECAA, the European Common Aviation Area – that’s the area ESAM covers; basically, ESAM is the aviation bit of the single market, and ECAA the aviation bit of the European Economic Area, or EEA. Then there’s ESAA, the European Aviation Safety Agency, which regulates, well, you can probably guess what it regulates to be honest.

All this may sound a bit dry-

It is.

-it is a bit dry, yes. But it’s also the thing that made it much easier to travel around Europe. It made the European aviation industry much more competitive, which is where the whole cheap flights thing came from.

In a speech last December, Andrew Haines, the boss of Britain’s Civil Aviation Authority said that, since 2000, the number of destinations served from UK airports has doubled; since 1993, fares have dropped by a third. Which is brilliant.

Brexit, though, means we’re probably going to have to pull out of these arrangements.

Stop talking Britain down.

Don’t tell me, tell Brexit secretary David Davis. To monitor and enforce all these international agreements, you need an international court system. That’s the European Court of Justice, which ministers have repeatedly made clear that we’re leaving.

So: last March, when Davis was asked by a select committee whether the open skies system would persist, he replied: “One would presume that would not apply to us” – although he promised he’d fight for a successor, which is very reassuring. 

We can always holiday elsewhere. 

Perhaps you can – O’Leary also claimed (I’m still not making this up) that a senior Brexit minister had told him that lost European airline traffic could be made up for through a bilateral agreement with Pakistan. Which seems a bit optimistic to me, but what do I know.

Intercontinental flights are still likely to be more difficult, though. Since 2007, flights between Europe and the US have operated under a separate open skies agreement, and leaving the EU means we’re we’re about to fall out of that, too.  

Surely we’ll just revert to whatever rules there were before.

Apparently not. Airlines for America – a trade body for... well, you can probably guess that, too – has pointed out that, if we do, there are no historic rules to fall back on: there’s no aviation equivalent of the WTO.

The claim that flights are going to just stop is definitely a worst case scenario: in practice, we can probably negotiate a bunch of new agreements. But we’re already negotiating a lot of other things, and we’re on a deadline, so we’re tight for time.

In fact, we’re really tight for time. Airlines for America has also argued that – because so many tickets are sold a year or more in advance – airlines really need a new deal in place by March 2018, if they’re to have faith they can keep flying. So it’s asking for aviation to be prioritised in negotiations.

The only problem is, we can’t negotiate anything else until the EU decides we’ve made enough progress on the divorce bill and the rights of EU nationals. And the clock’s ticking.

This is just remoaning. Brexit will set us free.

A little bit, maybe. CAA’s Haines has also said he believes “talk of significant retrenchment is very much over-stated, and Brexit offers potential opportunities in other areas”. Falling out of Europe means falling out of European ownership rules, so itcould bring foreign capital into the UK aviation industry (assuming anyone still wants to invest, of course). It would also mean more flexibility on “slot rules”, by which airports have to hand out landing times, and which are I gather a source of some contention at the moment.

But Haines also pointed out that the UK has been one of the most influential contributors to European aviation regulations: leaving the European system will mean we lose that influence. And let’s not forget that it was European law that gave passengers the right to redress when things go wrong: if you’ve ever had a refund after long delays, you’ve got the EU to thank.

So: the planes may not stop flying. But the UK will have less influence over the future of aviation; passengers might have fewer consumer rights; and while it’s not clear that Brexit will mean vastly fewer flights, it’s hard to see how it will mean more, so between that and the slide in sterling, prices are likely to rise, too.

It’s not that Brexit is inevitably going to mean disaster. It’s just that it’ll take a lot of effort for very little obvious reward. Which is becoming something of a theme.

Still, we’ll be free of those bureaucrats at the ECJ, won’t be?

This’ll be a great comfort when we’re all holidaying in Grimsby.

Jonn Elledge edits the New Statesman's sister site CityMetric, and writes for the NS about subjects including politics, history and Brexit. You can find him on Twitter or Facebook.