Written submission from Kent County Council (CVT0010)
The COVID-19 pandemic and international trade Inquiry
Kent County Council Response, April 2020
Introduction:
Several years ago, export levels in Kent were found to be lower than other parts of the South East so Kent County Council (KCC) brought together a range of local business support organisations to work together to provide a more joined-up approach supporting exporters under the ‘Kent International Business’ programme. The County Council has been working closely with the Department for International Trade, Enterprise Europe Network and Kent Invicta Chamber of Commerce in particular to review barriers to exporting and ensure that the right support is available to local firms. KCC has also delivered several European projects to help companies with international trade.
The KIB partner organisations have supported over 1,500 Kent-based businesses in the last 2 years with a range of export-related activities including export documentation (1,200 companies), coaching & micro-financing (39 Life Science companies), export diagnostics for 30 ‘new to export’ companies, market / trade show visits & European networking events (120 companies) as well as core service provision from DIT.
In these unprecedented times, Kent County Council is working alongside different local partners to reduce the negative impacts of COVID-19 on local businesses but it is also developing an economic recovery plan which aims to help key sectors in the county and the business community to recover from the current crisis as quickly as possible. This work recognises that although exporting may become difficult in the short term, international trade activity will need to be facilitated in future as a part of Kent and the UK’s economic recovery. Kent County Council’s response to this inquiry takes into account its export support work with SMEs and its broader thinking around economic recovery activity in the county.
a) In the short term, demand from many international markets (Asia in particular) has dried up leading to a dramatic reduction in export sales in the short term and lost revenue for UK companies. The impacts of this might be felt in a few months’ time as the fulfilment of export orders and related payments can often take place over a period of months so the potential negative impacts for companies with a large percentage of export turnover may be slightly delayed. There are some economic sectors, on the other hand, which have seen increased international demand such as the agri-food sector.
b) In the medium term, demand from different international markets may pick up as different countries ease lockdown measures.
c) In the long term, it is hard to predict what may happen and how companies will be affected but there will no doubt be some winners and losers with companies losing long term overseas customers due to recession and weakened demand while others may find that they suddenly have a competitive edge or opportunities in new markets where local suppliers may no longer be operating.
a) The measures put in place by the government so far to help businesses in general with the negative impacts of the pandemic have been a lifeline for many firms and will ensure that many companies are able to resume activities after a period of significant disruption. However, there doesn’t seem to have been much specific activity aimed specifically at supporting businesses trading internationally. Whilst the current DIT offer has recently been clarified and many companies across the UK were contacted (some 160,000) and reminded about support mechanisms that they can access, much of the support highlighted as part of this communication forms part of the ‘business-as-usual’ offer from DIT and UK Export Finance. There don’t seem to have been many new initiatives developed at a national level to specifically help exporters which may have seen a drop in international sales or may be facing new challenges with resources, logistics or international payments.
b) The government should therefore consider if there are any specific needs being highlighted by exporters (using intelligence from DIT International Trade Advisors, Economic Surveys from the British Chambers of Commerce etc.) to see if new specific interventions are needed in the short to medium term to ensure that British firms can continue to export their goods and services. These measures might also need to take into account additional barriers that companies may face following the end of the transition period (particular with EU markets).
a) In the medium term, companies may find that overseas orders have decreased or ceased and that demand from overseas customers has significantly reduced – this will depend on the sector. There could also be significant losses for companies due to exchange rate risks, or currency being held by firms for markets that are no longer able to purchase goods or services from the UK.
b) There has been a recent increase in export documentation activity with the Kent Invicta Chamber of Commerce which could mean that firms are looking to diversify into new supply chains or markets and there may be new opportunities for agile firms which are ready to take advantage of previously unexplored markets.
c) Whilst mitigating the immediate negative effects for exporters is extremely important, the Government should remain committed to providing suitable export support services (through DIT primarily) in the medium term to ensure that firms can be assisted where required to take advantage of opportunities to expand internationally as the current crisis abates. Indeed, when international markets start to open up again the government should play a key role in ensuring that barriers for UK firms are minimised (for example those outlined in the 2018 HMG Export Strategy including access to finance, market access issues & trade barriers) as firms may have less internal resource to deal with such challenges in the future and may value access to a broad range of support services (both from within the UK and from overseas posts) as they seek to expand internationally.
a) Companies operating in different international markets may find that they have shift their focus to respond to fluctuating demand from different countries. Therefore, being ready to respond to rising demand from one market at a particular time would be a useful skill for companies to have. In order to do this, they will need to be export-ready for new international markets and will need to understand requirements and prepare to adhere to these for each market where they might wish to be active. Companies should work with DIT and other export-support organisations to understand how they can ensure that they are ready to respond to overseas orders when they come in. Understanding individual market requirements is even more important at the moment as the previous uncertainty about trading arrangements with the EU and other international markets coupled with the current uncertainty and fluctuating demand due to coronavirus is causing concern for British firms – clear guidance will help companies understand new requirements for different markets.
5. How best can the UK Government facilitate trade in essential goods during the pandemic?
a) Business told us through a commissioned piece of research in 2017, that local (in-market) bureaucracy and finding the right ‘in-market’ contacts (partners, distributors and reliable local contacts) are among the main barriers they face with exporting. Given that companies now face many new challenges as a result of the pandemic, the UK Government could focus on the following:
b) The government also needs to ensure that border fluidity is retained to enable goods to be transported from the UK to other countries and vice versa. Places like Kent play a vital role in managing freight movements thanks to key ports including Dover and the Channel Tunnel. Ensuring that goods can flow freely in the short and medium term will be vital in enabling exporters to ship their products in a timely way, especially as any new regulations or requirements for checks on goods leaving for mainland Europe come into force at the end of the year. The government should work with local authorities, the private sector and European/international counterparts to guarantee border fluidity and ensure that no additional barriers get in the way of successfully shipping export orders.
6. How should the Department for International Trade work with the rest of central government, as well as devolved, local and regional government, to deliver a coordinated response to the pandemic?
a) DIT should first and foremost provide, clear and concise communications aimed at helping businesses understand any new / evolving requirements or issues related to international trade. This information should be collated and summarised from other government departments (e.g. DEFRA for the agri-food sector or DCMS for the digital & creative industries) and shared with local government organisations and other local partners to ensure that businesses can access important information in a timely and accessible way. DIT should also take into account information being fed back from businesses via Growth Hubs, local authorities etc. to inform its medium-term strategy for helping businesses trading internationally. DIT has an important role to play in providing sector-specific and market-specific information and advice to businesses. It should continue to provide training, advice and information that responds to the evolving needs of companies as well as market intelligence. It should ensure that it liaises with other government departments and local authorities to take into account advice, intelligence and expertise from all levels of government to respond to requests from and the needs of businesses.
April 2020