Record numbers of British businesses are optimistic about their growth prospects despite difficulties brought about by Brexit and the continued impact of the Covid-19 pandemic, according to research by Santander.
In its autumn Trade Barometer, released this week, the bank finds that 73% of British exporters are confident they will grow over the next three years, up from 65% in the spring issue of the survey.
“Confidence is surging among UK businesses as they recover from the worst impacts of the Covid-19 crisis and look to new growth opportunities – in international markets as well as in the UK,” the report says.
But behind the positive headline figures, a more nuanced picture emerges.
Although 43% of businesses polled in the twice-yearly report say their performance has improved over the past 12 months, up from just 30% in the spring, this is tempered by worries such as difficulties with recruitment and supply chain challenges: 67% fear their ability to attract skilled staff could limit their ability to grow, while 51% are concerned about transport costs.
Frustrations with the post-Brexit trade deal have also risen sharply since the spring, with growing numbers of businesses questioning their ambitions for EU trade. Fully 38% describe the UK-EU trade agreement as not sufficient for them to continue selling in the EU, with the same proportion saying they are “anxious” about tariffs on imported goods, compared to 35% six months ago.
“It was not meant to be like this,” says the bank. “The trade agreement between the UK and the EU, sealed at the eleventh hour last December, should have provided businesses with clarity about a framework for trade. In practice, however, many businesses see serious downsides to the agreement; and in many areas, frustration and disquiet are increasing – these are not mere teething problems.”
Two issues dominate. More than a third of businesses (37%) complain that trading in the EU has become more time-consuming, reflecting the more onerous administrative and regulatory requirements on sales from the UK into the EU. And the same proportion (37%) point to higher tariffs and charges, with the UK no longer benefitting from tariff-free trade with the EU.
As a result, more than a quarter of international businesses say their exports have fallen since the trade agreement came into effect on January 1, against just 17% that have registered an increase.
The bank’s survey results also show the extent to which the complexities of Brexit have driven companies to look further afield for new trading opportunities.
Santander’s spring 2021 Trade Barometer saw, for the first time, more businesses pick out North America as likely to generate more growth for their firms than the EU. Six months on, North America has extended its lead: 39% of businesses now see it as their chief growth engine, against 35% that cite the EU.
However, all is not rosy across the pond, with 29% of companies flagging US “protectionism” as an operational challenge to doing business there.
In other downside risks to trade, businesses are also still counting the costs of Covid-19, the report says, with a broad range of pandemic-related impacts continuing to cause significant upheaval. More than a third of businesses (35%) fear further supply chain disruption over the next 12 months; 32% point to likely issues with staffing. The potential for further waves of infections is also weighing on sentiment, with Covid-19 regarded as the most likely source of negative impact on businesses over the next 12 months, though the number of companies citing this fear has fallen to 52% from 68% in the spring.
In the face of these serious challenges, the increase in business confidence revealed by the survey is all the more surprising, however the bank says that the reopening of the British economy since lockdown earlier this year has “driven optimism to unprecedented levels” and that British businesses, despite some ongoing anxieties, are “primed to invest and expand” as the global recovery gathers pace.
To turn this ambition into reality, Santander is calling for more help to be provided for British exporters, including support with digital transformation, such as how to make use of online marketplaces, sales channels and supply chain solutions; support with access into new markets; and cost reductions in transport and logistics, as businesses work out how to close the gaps they have identified.