by Atul Bhakta, CEO, One World Express
The economic impact of COVID-19 have been felt around the around the world. The UK was no exception; a 24.5% contraction in GDP has taken place since February 2020, according to the Office of National Statistics.
Despite the contraction of the UK’s economy, though, there are glimmers of hope to cling to. Indeed, we might already be heading into the “recovery” phase of the crisis; GDP grew by 1.8% in May, and although this may not seem like much, it sets the UK on the right path towards future prosperity in the near future.
One would expect greater growth in the months as lockdown measures are lifted and different parts of the economy open for business once again. We are already seeing the high street slowly come back to life as shops of all kinds re-open; and industries including construction, domestic tourism and hospitality are slowly returning to pre-COVID levels of activity.
However, it is global trade that represents arguably the most important aspect to the UK’s financial prospects as the Government endeavours to revitalise the economy. A mainstay of the political debate before COVID-19 hit, the importance of facilitating easier trade with other world powers has seemingly been side-lined as all of our collective efforts have rightly been directed towards COVID-19 containment.
COVID, Brexit and the rest of the world
It is easy to forget just how omnipresent Brexit was in our national debate before the coronavirus pandemic hit. Yet despite the relative lack of attention on Brexit in lieu of the pandemic, the dangers of spinning out of the Single Market without a deal have never been more present.
While Brexit might have formally passed into law on 31st January 2020, the UK only officially leaves the Single Market on 1st January 2021. If adequate preparations are not made, the economic recovery outlined above could be stopped dead in its tracks.
The majority of these preparations revolve around securing the UK’s right to seamlessly trade with countries and blocs from around the world. British companies currently enjoy the easy access they do due to pre-existing deals the EU has made with such organisations over the last 40 years. Ensuring British companies continue to take advantage of such relationships should absolutely be at the top of the Government’s priority list.
Thankfully, it seems the importance of this has been recognised by the relevant Governmental departments. Officials from 10 Downing Street recently revealed what the Governments’ soon-to-be-announced new trading policy will look like; appreciatively reiterating the importance of access to low-tariff international trade for British firms.
A key part of the recovery
As the second half of 2020 unfolds, be it with a remarkably fast economic recovery or a second spike in COVID-19 cases, global trade will be an inescapably huge part the UK’s economic future.
In 2019, the UK’s exports of goods and services totalled £700 billion, with imports valued at £724 billion, according to the Government’s own data. With the EU accounting for 43% of those exports, the need for functional, working trade relationship with the EU after Brexit is finalised cannot be understated.
Further, a much broader approach – namely free trade agreements (FTAs) with major trading partners across the globe – will be vital. Every FTA signed will not only open new opportunities for British businesses, but it will also instil confidence in the UK’s future trading prospects. Conversely, failure to execute an effective, progressive trade policy in the months ahead will create chaos within the majority of supply chains.
If the Government fails in establishing strong trading relationships, particularly with the EU, we can expect the UK to crash out of the Single Market in a weak position. This could be disastrous, not only for UK SMEs eager to trade with the outside world but for consumers everywhere, as increased tariffs up the prices of goods and services across almost every sector.
For the UK to successfully execute a post-pandemic recovery, the scenario outlined above cannot be allowed to happen. Instead, if the right precautions are taken and continued access to low-tariff trade is secured, there is reason to be optimistic that we, as a nation, can fully embrace global trade and enjoy the benefits of lucrative exports and instrumental imports for decades to come.
Atul is the CEO of One World Express, a position he has held for over 20 years. He also holds senior titles for other retail companies, underlining his vast experience and expertise in the world of eCommerce, trade and business management.
