The global economy is entering a crisis period. Low commodity prices, emerging market slowdown, uneven prosperity and unpredictable security threats have given rise to mounting nationalism and protectionism in almost every corner of the world.
The Transatlantic Trade and Investment Partnership (TTIP) and the World Trade Organisation’s (WTO) Trade Facilitation Agreement are still a long way from completion and the trade finance gap (between what exporters need and banks offer) is widening – at US$1.4 trillion, according to the Asian Development Bank (ADB).
Add to that the market volatility of recent weeks and the so-called ‘Brexit vote’ set for June 23 on the UK’s continued membership of the European Union (EU) that could alter the influence of British companies worldwide for a generation, and it’s possible to share the unease of many UK corporate treasurers and chief financial officers (CFOs), who increasingly feel powerless in the face of circumstances with far reaching consequences.
Yet they needn’t. UK business leaders must speak out in the face of these serious headwinds. Organisations such as the International Chamber of Commerce (ICC) can provide UK companies with a voice at the key global decision-making tables.
It is a concern that the global banking industry, under pressure to comply with new regulations including the Basel III capital adequacy regime, is being hampered in providing access to the trade finance that small to medium enterprises (SMEs) so desperately need. According to ICC’s 2015 Global Survey of Trade Finance, SMEs account for nearly 53% of all rejected trade finance transactions.
Even the pillars of the UK banking industry: HSBC, Standard Chartered, RBS, Lloyds, and Barclays, are facing stringent regulations that require them to retain more capital on their balance sheet, leaving them with less to lend. What’s more, they have also been forced to reconsider their emerging market presence – with HSBC last year famously declaring its intentions to “shrink and simplify” further – potentially stunting the global growth ambitions of UK corporates.
The UK faces an additional challenge as the country decides on whether it should remain in or leave the EU – by far the country’s most significant trading partner. Indeed, given that EU countries account for over 51% of British exports in goods, a Brexit could have deeply-significant consequences for UK corporates which, of course, do not get a vote.
International businesses also view the prospect of Brexit with alarm. The majority (86%) believe that the UK should remain within the EU, according to ICC’s recent Brexit survey, while 74% of respondents also felt that the UK would have less influence over policy if it left the EU.
The British clout
Given this uncertainty, who can blame UK companies for holding their breath – delaying investments and focusing on tidying their balance sheet rather than taking on new risks? Certainly, major investments require a degree of control. That is difficult when surveying the current, highly changeable, landscape.
That said, the UK business network touches every corner of world and can influence decisions taken at the global stage. The UK is the sixth-largest exporter, second-largest service economy, second-largest economy and number one foreign direct investment (FDI) destination within the EU. It is the largest financial transactions hub in the world, has a globally renowned pro-business environment (which has attracted a buzzing fintech scene) and is often regarded as a gateway to both the EU and Commonwealth. The UK is a global market shaper and the world cares about what UK business leaders have to say.
The problem, however, is that UK plc has become inward-looking with many shying away from commenting on important issues impacting them globally; whether it be Brexit, regulation, China, or commodities. That’s a shame because more often than not, their American, Indian, German, Brazilian and French contemporaries are at the table making global decisions that impact their companies, and are eager to hear from UK business.
Finding a voice
This is where organisations such as ICC come in; providing UK corporates with a mouthpiece to voice concerns and influence policies that will ultimately impact their bottom line.
Certainly, the role of ICC – the world’s business organisation – is to act as the voice of international business at an inter-governmental level, with the aim of promoting peace through trade. It does so for a network that comprises over six million companies, chambers of commerce, and business associations in more than 130 countries.
ICC has a seat at the world’s major decision-making tables: helping companies and governments navigate shifts in a collaborative manner to benefit the world economy. ICC United Kingdom can therefore take the voice of British corporates with it.
British business has enormous influence; but must learn to wield it and should certainly not retrench in the face of a challenging environment surrounding it. Companies must engage and play their part in helping find solutions. It’s in their own interests – and everyone else’s – that they fully engage.
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