The Brexit vote will take another couple years to go into effect, but that doesn't mean businesses can't start anticipating the changes.
While the details of the Brexit deals' impact on export finance aren't clear yet, there are several areas that will likely be impacted in one way or another.
In this post, we'll examine how the Brexit deal will impact future trade and export finance.
What Brexit Means for Export Finance
The world of United Kingdom export finance is currently up in the air, but there are key areas which will likely be affected. The changes will be contingent on the final trade agreements the UK makes with the European Union and other nations. Check out the list below to see what might change:
Lower Export Prices
Depending on the nature of the UK's future trade deals, prices for exported goods could witness a drop.
If the UK continues to export to countries within the European Union, for example, producers might have to lower their prices to make their products more attractive to importers. Alternatively, if the UK enters into trade agreements with different countries, concerns regarding tariffs will be minimized.
Different Export Markets
The Brexit deal might end up changing what countries the UK does business with, depending on the final trade deals reached.
The UK already has access to expansive export markets located in United States, Canada, Japan, China, and the United Arab Emirates. This list could expand, however, if there's enough global interest from free markets. In fact, the UK is currently promoting that idea with its "Exporting Is Great" campaign.
Many free market countries are already showing interest in entering into a UK trade deal, actually. The UK could leverage its strong ties with India, for example. Other interested countries include Australia and South Africa.
Pound Exchange Rates
The impact on export finance and market access is clouded with uncertainty and primarily revolves around potential trade agreements made with the European Union. Exchange rates for the Pound, however, is a more cut and dry issue. Currently, the Pound is proving stable, though, as investors have accounted for the impact of Brexit talks.
Export tariffs will become an issue, but mainly for businesses that choose to continue doing business with the European Union as their leading market.
Obstacles in this area exist because the European Union will have to ensure its regulations are met while preserving its member's benefits. This could translate into the previously mentioned lower prices.
Larger companies will be able to take that hit to their profits. Smaller companies, however, will likely have more trouble maintaining their profit margins.
Watching the News
The final outcome of the Brexit vote has yet to be seen. But don't fret just yet. The result might actually be in your favor. As the story unfolds in forthcoming months, please do share your views and thoughts with us.