Businesses should start adopting digital trade strategies now to unlock significant economic and operational benefits, says a new report by the Institute of Export and International Trade (IOE&IT).
Co-authored with global consulting firm EY in response to growing uncertainty within the private sector, A pathway for businesses to seize trade opportunities outlines practical steps that companies can take immediately in order to be ready to leverage the full potential of technology in trade.
“We are getting more and more questions from our clients around how to deal with this really complicated environment,” Sally Jones, trade policy and strategy partner at EY, tells GTR. “We hear a lot from our clients that they don’t want to be the first mover, because in this space, the benefits come when the whole ecosystem is involved, so everyone effectively wants to be the second, third or fourth mover. But this approach results in no-one doing anything.”
The report highlights available solutions such as platforms that enable the creation and sharing of digital trade documents, customs processes automation and supply chain management, pointing to benefits including increased efficiency and market opportunities, lower costs, economies of scale and resilience – as well as the ability to meet increasing regulatory requirements on ESG within the supply chain.
“In virtually every other aspect of business activity, companies have digitised. They’ve improved their services and adapted to new ways of working,” says Marco Forgione, IOE&IT director general. “What we’re saying is, this is no more complicated than that. It is as simple as just making sure that you’ve got the systems, processes or platforms in place, and none of this is difficult or scary. The reality is that these are quite simple changes that need to be implemented, and the business benefit will be so significant as to make any immediate challenge almost immaterial.”
Taking advantage of a changing environment
The joint publication highlights changes in the regulatory, legislative and policy environment as potential drivers for the utilisation of digital tools in trade. One example of this is the imminent passage of the Electronic Trade Documents Bill (ETDB), which , according to a government spokesperson, will “significantly lower administration costs” and provide a “£1.14bn boost to UK business over a 10-year period”.
“Much international trade is still carried out using paper documents despite the cost, inefficiency and risk of fraud that this can entail,” Matthew Cox, partner at law firm HFW, tells GTR. “The ETDB has the potential to tackle these issues, allowing electronic documents to have the same validity and functionality under English law as their paper equivalents, removing one of the key obstacles to their use.”
“Crucially, electronic trading documents are not an abstract concept, and promotion of trade finance as an area which has great potential to benefit from increased digitalisation certainly chimes with what we are hearing from our clients,” he adds.
But whether businesses are getting enough support to capitalise on this transformative legislative change is under question. “The UK is positioning itself at the centre of the digital transformation of international trade. The gap is now between where policymakers are and where businesses are,” says Forgione.
“This is inevitably a difficult landscape to navigate, because it’s fast moving, and because it’s fragmented. It is fragmented by digital islands, where people have created individual solutions that don’t interoperate with others,” says Jones, adding that trade is also fragmented at the government level.
“The Department for Digital, Culture, Media and Sport (DCMS) held digital strategy, the Department for Business, Energy and Industrial Strategy held business strategy, the Treasury holds the purse strings, HM Revenue and Customs (HMRC) is looking at the Single Trade Window, the Target Operating Model is cross governmental, and the Department for International Trade was dealing with the overarching trade strategy. Then you have numerous different agencies with skin in the game, such as the Department for Environment, Food and Rural Affairs. Then you add in the Cabinet Office and the Home Office. No wonder it’s hard to join up,” she says.
Disjointed approach from government
This fragmentation was brought into sharp focus during last week’s Spring Budget, which Chris Southworth, secretary general of the International Chamber of Commerce UK, characterised as “disappointing” for trade.
While the budget announcement contained a package of measures to “streamline and digitise” customs and excise authorisations at the HMRC, no mention was made of the forthcoming legislative reform – an initiative spearheaded by the DCMS until a February overhaul of government departments brought it under the new Department for Science, Innovation and Technology – and no support was announced to help businesses take advantage of it.
“It was a huge disappointment that the Electronic Trade Documents Bill wasn’t mentioned in the Budget,” Southworth tells GTR. “The government needs to step up and step forward to capitalise on the benefits of this new law. Beyond the vast benefits to trade, the bill is a massive opportunity to transform the system and drive growth for local enterprise through tools such as the electronic promissory note – but this opportunity is at risk of being wasted because of a lack of communication between government departments.”
In response to a request by GTR to the newly created Department for Business and Trade about the work it is doing to enable businesses to leverage the incoming law change for trade, a government spokesperson said: “We want to ensure that more businesses in the UK have the confidence, investment and tools they need to sell their goods and services to the world. Through our £27bn of tax cuts and ambitious agenda of removing trade barriers, signing free trade deals in the world’s fastest growing economies and hitting £1tn of exports by 2030, we are opening up lucrative opportunities for UK firms – big and small – to start or grow their exporting journey.”
To ensure that this exporting journey is a digitally enabled one, the IOE&IT and EY report is calling for businesses to connect with partners, trade bodies and other stakeholders to exchange information on adopting tradetech, as well as engaging with government.
“The real benefits here, which are in the billions of pounds, accrue when the whole ecosystem is engaged,” says EY’s Jones. “Bringing the whole ecosystem along the same journey is really important, be that your suppliers, your customers, your finance providers or insurers. This is a large undertaking, but if businesses don’t make a start now, they’ll never get anywhere.”