Brexit: How Will It Affect International Trade?

On June 24, after months of heated deliberation, Britain voted to leave the European Union in a nationwide referendum. Soon after the results of the referendum were released, British Prime Minister David Cameron announced that he would resign from his post. Global stock markets were rattled as investors reacted swiftly – moving capital out of investments in the UK and into “safe haven” assets in other countries. Though the “Brexit” transition will take at least two years to complete, economic analysts are already speculating about the far-reaching effects it could have on trade and commerce. In the short term, Britain’s departure from the EU is expected to have at least four distinct effects on international trade.

Disrupting the Movement of Goods

Currently, goods can move freely between the borders of Britain and other member states in the EU in much the same way the goods can easily be moved across state lines in the United States. As the Brexit transition progresses, however, borders between Britain and other European countries will become less permeable. In essence, commerce between Britain and the rest of Western Europe will start to look more like international trade rather than domestic trade. Needless to say, it will take a while for regulatory agencies and logistics companies to adjust to this change. During this period, we’re likely to see a general slowdown in the movement of goods between Britain and countries in the EU.

Driving Demand for Trade Services

Many retailers and manufacturers are going to need help adjusting to the new logistical considerations associated with the Brexit. This will provide an opportunity for consulting firms and logistics companies to provide their services to these organizations as they learn to navigate changing trade rules and regulations. As such, these companies will probably have no shortage of new business in the coming years.

Possible Sales Boost for U.K. Retailers

A weak pound might be good news for British retailers, at least in the short term. The value of Britain’s national currency fell sharply following the Brexit, which could make cheap British goods appealing to buyers in other countries. Over time, however, this effect is likely to become less pronounced.

Halt in International Mergers and Acquisitions

It’s going to take a while for companies in other countries to regain confidence in the profitability of doing business with companies in Britain. During the Brexit transition, we probably won’t see too many mergers and acquisitions between British companies and businesses elsewhere in the world.

Bear in mind that it’s going to take years for the ripple effects from the Brexit to fully play out. In July, Britain appointed four new ministers to its recently-formed International Trade Department in preparation for the country’s break with the EU. By bolstering its trade department early on in the process, Britain may be able to weather the Brexit’s economic turbulence with relative ease.

Here in Western New York, we’re fortunate enough to be pretty far removed from most of the turmoil associated with the Brexit. Likewise, it’s business as usual for the shipping and logistics industry in our area. Whether you need cross-border shipping, freight forwarding, or warehousing and fulfillment services, Speed Global Services is here to help. Contact us today to learn more.