No one knows what the future holds for UK business in a post-Brexit world, says Siddharth Shankar, but British businesses would be wise to shift their export focus from the EU to Asia
There is much uncertainty amongst British businesses at present. Brexit is approaching and the likelihood of a ‘no-deal’ scenario seems to be increasing. No one knows exactly what this will mean for British business but, in the short-term at least, the general outlook is gloomy. The British economy is likely to take a downturn and the pound is likely to weaken.
So what can British businesses do to buck the trend?
One answer is to begin selling their products in countries that do have a booming economy, a growing population and an appetite for British goods. Where does such a place exist, you might ask? Asia.
The emerging economies of Asia hold immense potential for UK business partnerships. Asia has a population of nearly 4.5 billion people. Increasing salaries mean Asia has the fastest growing middle class in the world. As a result, Asia’s population has an increasingly disposable income and consumption is increasing. The demand for products and brands is at an all-time high and this is set to continue. Collectively, Asia represents 60% of the total buying power of the world.
Millennials in Asian countries are starting to lead the market, with an appreciation of western culture and products. The UK in particular has a real privilege in this market. There is an especially strong demand for high-quality British-made goods.
Research from Barclays Corporate Banking has shown that, internationally, 39% of consumers are more likely to buy a product if it displays the British flag. This was especially true for consumers in Asia and the Middle East (India, 67%; UAE, 62%; China, 61%).
The research also showed that this was greater among young people than old people. Almost half (48%) of those surveyed said a product showing the Union Jack increased their likelihood of purchasing a product, compared to a quarter (24%) of over 55s. In China, this was as high as 73% in 25-34 year olds.
The logic behind the data is that the lineage of British goods goes straight to Asian consumers’ hearts. Half of Asian countries were British colonies. It is very natural for the consumers in these markets to trust UK products are of the best quality and that they are willing to pay a premium as a result.
The latest figures from the Department for International Trade already show a significant uplift in exports to Asia. UK exports to India grew by 31.8% in the year to March 2018, whilst exports to China grew by 15.3%. This has already helped UK exports reach a record high, which has led the government to pledge to transform the UK into a ‘21st century exporting superpower’.
So which British companies are already exporting to Asia and finding success?
Brands like Burberry, MG motors, Rolls Royce, Dyson, and an increasing number of gin and whisky brands are surprisingly successful in China, India and ASEAN countries. Besides the quality and craftsmanship that they stand for, the richness in their story and history makes their goods coveted items.
Even within the UK, the footfall in many high-end outlets is largely Asian tourists. This isn’t simply because these goods are tax free for them. The recognition of UK brands is the main driver for purchasing – and that comes from the consumer’s heart.
Asian markets are now starting to recognise the relatively smaller brands too. The reasons behind this are also more complex than a mere show of wealth. A big brand product, such as Louis Vuitton or Coach, that people purchase and show to friends and colleagues, might demonstrate the owner is wealthy. But a British brand, even one which is not well known, might convey that the owner has taste. This is the new generation Asian middle-class consumers’ mind set.
British businesses’ export strategies need to shift their focus – away from the EU and to new markets such as Asia. The upside, if the pound weakens, is that exporting will become more profitable, as the price of UK goods will then become more competitive. For UK local capital, it would then be wise to put investment into local businesses that export goods abroad. The engine of the UK’s post-Brexit economy could actually depend on this.
Production-wise, the government estimates that over 400,000 UK brands and small businesses have the potential to export decent products that carry the value and heritage of the UK.