The US is a key trading partner for the majority of British companies, according to research conducted by the Economist Intelligence Unit on behalf of American Express.
The research, which includes a survey of 531 companies worldwide, explores the global trading relationships, looking at how companies trade, the challenges they face and how they expect international trade with the US to change based on recent trends and upcoming political and regulatory shifts.
The research found that British companies are highly optimistic about trade growth with the US, indicating a continued strong relationship between the US and the UK:
– Companies ranked the US as their top trading partner by revenue, followed by domestic trade within the UK and trade with Mexico and Canada taking joint third place
– The majority (82%) of British companies expect an increase in trade with the U.S. over the next five years, versus the global average of 65% of companies and a European average of 77%.
While 8% of British companies anticipate a general decline in overseas trade over the next five years, only 2% expect trade with the US to decrease in the same time period. Against this backdrop, British companies were broadly satisfied with the quality of trade related infrastructure in the U.S. and 54% of respondents stated that trade infrastructure was either ‘very good’ or ‘excellent’.
Jose Carvalho, Senior Vice President of American Express Global Commercial Payments, Europe, commented: “It is hugely encouraging to see the US as a major trading market for British companies, with the appetite continuing to rise year on year. Post referendum the international playing field is even more important and these results show that there is a clear opportunity to grow revenue through international trade. The availability of flexible finance solutions will be critical for companies that are looking to grow their international trading footprint.”
International trade also brings with it a number of complexities and while the challenges in trading with the U.S. were less pronounced than with other countries, a number of specific pain points were identified. Globally 41% of respondents ranked exchange rate volatility as their most significant challenge when trading with the U.S, Meanwhile, in the UK, where the research was conducted ahead of the UK referendum, 42% of British companies cited exchange rate volatility as a trade barrier. While UK trade is balanced equally between goods and services, transportation costs and delivery delays in the US are a significant issue for 36% of British companies who say they rely on a fairly even combination of road, air and rail for transporting goods between the two countries. Third in the list of challenges, and most surprising, given the clear advantage of doing business in the same language, was the fact that 30% of companies listed insufficient market knowledge as a barrier to trade.
Trade regulation, an issue for the vast majority of countries surveyed was not a significant cause for concern amongst British businesses, and was mentioned by only 14% of respondents as a trade pain point. However, costs associated with these changes have had a clear impact, with 70% of UK companies saying they have seen an increase in the cost of doing business with the US due to trade-related regulatory and compliance activities.
The final most pronounced pain point for companies in the global survey related to payments. 32% of respondents cited ‘making payments’ as among the top challenge with issues chiefly arising from currency fluctuation, process inefficiency, limited payment visibility and bank fees. Within the UK making payments was mentioned by only 26% of companies as a challenge, and 28% of respondents said there was a shortage of external finance available for trade with the U.S. Other obstacles to accessing finance included ‘lack of dollar liquidity’ and ‘high transaction costs’, which was mentioned by 20% and 16% of respondents respectively.