There continues to be a ripple effect across UK-based businesses that trade internationally, as a result of Brexit and the pandemic. Businesses need to manage the day-to-day challenges and implement new strategies to cope with a more volatile trading environment.
The process of importing and exporting goods has become much more challenging for businesses for a variety of reasons. Not only are businesses having to contend with significant global supply shortages affecting certain goods, such as semiconductor chips and timber, uncertainty generated by factors such as geopolitical tension, cost inflation, forex volatility and significant shifts in demand brought on by the pandemic are having a dramatic impact across multiple markets.
Managing challenges
There are a number of businesses that have already taken steps to protect margins and increase certainty by fixing prices for key supply agreements for the short to medium term. For businesses that have experienced a dip in consumption as a result of the pandemic, some may have resorted to shortening supply chains in order to reduce costs and improve reliability. On the other hand, for those where demand levels have increased, it remains important to leverage volume orders by shopping around for the best deals possible. There are major challenges in some sectors, such as:
- Worker shortages
- Skills shortages
- Increased employee costs
These are causing further disruption to supply chains by delaying goods movements.
New Border Controls
There are now new border controls in place affecting both the import and export activity within the EU, further compounding the volatile trading environment.
New Border Control Posts have only recently been established, leading to a higher risk of supply chain disruption. There are also additional costs to consider in addition to a greater administrative burden in the form of customs declarations. Further controls including physical checks at Inland Border Facilities and Border Control Posts, plus Safety and Security Declarations will continue to be phased in this year.
Stay up to date
It is important for businesses trading with the EU to access the most up-to-date advice to remain compliant. Both changes to legislative and governance changes are crucial for business to be aware of, as these may have impacted their operations model – examples of these include postponed import VAT account and the new Rules of Origin. There may be some businesses that may need access to specialist resources such as tax advice and support in preparing and submitting customs declarations.
Strategic planning
Businesses should review their international trading strategy to ensure it is fit for purpose in uncertain times. To start with, businesses should make sure they have an accurate understanding of what their customers and other stakeholders need from them, as well as the conditions affecting their end markets. This requires qualitative market research with key stakeholder groups, and the findings should be kept under review.
Reviewing the cost base of the business is also a practical move, which can often throw up opportunities to increases resilience and trim overheads. Businesses need to remain agile in today’s uncertain world, with fluid strategic plans. This will allow businesses to easily adapt in case of shifts in demand or financial changes that, if left unchecked, could undermine profitability. The use of data has never been so vital, therefore ensuring there are systems in place to collect and review it will help to keep strategies on track.
Evolving systems
It is likely that value systems have evolved during the pandemic, therefore, business leaders may need to adjust their thinking to take this into account. For example, with skills shortages high, greater focus may need to be given to finding new ways of attracting and retaining talent as wells as enhancing the company’s employer brand.
Equally, a growing focus on social and environmental governance means businesses may need to place greater emphasis on measuring their impact on the planet and society as a whole. Many boards used the pandemic as an opportunity to review their priorities in order to focus more on non-financial outputs in a bid to differentiate the business and enhance its sustainability.
Internal focus
Businesses should realise the importance of an internal focus during the current volatile trading environment, as well as looking outwards. Investing in people development strategies and enhancing employee incentives and remuneration will help to drive productivity and mitigate the risk of skills shortages. Investing in innovative technologies and systems can also improve efficiency and help to give businesses a competitive edge.
Running a business well by optimising profits and minimising the impact of cashflow shocks has become more challenging generally, but even more so for organisations that are trading internationally. Armed with a strategic vision and plan that is fit for purpose, businesses will be better placed to manage disruption and fulfil their growth potential.
For more information on how your business can manage its international trade strategy, contact Martin Hamilton below.
