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Preparing for post-Brexit business with China

ByDave Stopher

Oct 6, 2018

Hasn’t time flown by? March 29th 2019 is quickly creeping upon us, and yet, any deal with the European Union after Brexit is an unclear as ever. How are businesses to prepare for exiting the EU? It’s a cause for concern among many, but less than a third of UK companies have a “Brexit contingency” plan ready should we crash out in a no-deal scenario.

Though a no-deal Brexit would be a difficult situation to handle, one silver lining would be that the UK could freely discuss trade deals with the wider 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 interested in a trade deal with the UK? 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.

With the Belt and Road Initiative, China hopes to build trade connections between Asia and the wider 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 Business Insider UK observed a difference in opinion regarding the Belt and Road. 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.

But opinions could shift depending on how Britain’s relationship with China evolves. 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.

British beef exports were originally banned in 1996 by the EU as a response to an outbreak 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 export to China? 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

China is a huge market, but there’s no reason why smaller brands can’t make their mark there. 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.

Tangle Teezer’s success in China has been linked to the product being used by a famous Chinese model, and its subsequent spread on social media. China loves its online shopping, so influencers should not be overlooked when planning to cater to the Chinese market.

Just like any other market, all you need is the right product and the right approach. 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 building design software experts, Oasys. The software alerted the construction company and designers to any potential bottlenecks, congestion problems, or other inefficiencies.

For businesses looking to break into the Chinese market, The Business Magazine offers solid advice. 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 is set to change the business landscape regardless of what, if any, deal we make. 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?

 

 

Sources:

https://www.bbc.co.uk/news/uk-45047874

https://www.bbc.co.uk/news/uk-45112872

https://metro.co.uk/2018/02/05/no-deal-brexit-7288751/

https://www.bbc.co.uk/news/uk-42821084

http://uk.businessinsider.com/what-is-belt-and-road-china-infrastructure-project-2018-1

http://uk.businessinsider.com/what-is-belt-and-road-china-infrastructure-project-2018-1/#it-consists-of-two-parts-the-belt-which-recreates-an-old-silk-road-land-route-and-the-road-which-is-not-actually-a-road-but-a-route-through-various-oceans-2

http://news.bbc.co.uk/1/hi/uk/4785610.stm

https://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8504445/Made-in-Britain-loved-in-China.html

http://www.thecreativeindustries.co.uk/uk-creative-overview/news-and-views/news-uk-firms-successfully-target-the-new-chinese-consumer

http://www.growthbusiness.co.uk/brexit-means-uk-business-china-europe-says-expert-2553464/

http://www.bimplus.co.uk/news/taking-our-bim-expertise-china/

https://www.oasys-software.com/case-studies/beijing-daxing-international/