Donald Trump’s victory in the presidential election could have consequences for thousands of small and medium-sized businesses in the UK.
During the campaign Trump made some remarks he may come to regret when he takes office in January, but his general policy stance in terms of trade and industry seems clear: an emphasis on rebuilding manufacturing capacity in the US and potentially reshoring jobs. This may mean – particularly in public contracts – fewer opportunities forBritish and other foreign businesses.
This will have repercussions in the UK. The US is the largest export destination for British manufacturers, worth £29.2bn so far in 2016. Indeed, the US is one of few countries with which the UK runs a trade surplus, with imports of £26.1bn in 2016.
Small and medium-sized firms do well in the US market. Among other EU economies, the UK has the highest proportion of SMEs exporting to the US (43%) followed by Italy (33%) and the Netherlands (31%).
Historically, the size of the population, the common language and business practices have made the US a friendly export market for UK firms. There have been a few issues, of course. For some firms the litigious nature of the US makes it unattractive, and there are concerns about product liability and intellectual property.
Looking forward, the situation seems likely to become more challenging. Even before the election some SME exporters reported seeing an increased focus from both US public and private sector clients to ensure jobs and productivity were captured domestically.
This pressure is likely to intensify in future and make things more difficult for UK-based manufacturers selling directly into the US. Firms might have to rethink their market entry strategies in to the US or how they sustain their market position. For example, it may be necessary for British firms to establish a US sales office or agency rather than selling directly. Alternatively, joint ventures with American firms either for marketing or broader collaboration may provide a valuable entry point to that country.
Three other factors may be important for firms considering the future of the US market. Talks around the Transatlantic Trade and Investment Partnership (TTIP) with the EU started in 2013 but now seem unlikely to progress. This means the EU will not benefit from a free trade agreement with the US, and the same is likely to be true of the UK. Barack Obama had already said that the UK would be at the back of the queueto negotiate free trade agreements with the US – in future there may not even be a queue.
The immediate reaction of the financial markets to the Trump election victory also suggests more volatility to come. Slower US growth is likely to have negative consequences globally, but will also limit US market opportunities for UK SMEs.
So where does this leave us? The US is, and will remain, a vital export market for British SMEs. Also important are the network of consular and embassy staff that the UK government maintains in the US. Run by the Department for International Trade, they provide useful market entry points, information and contacts for UK exporters.
We already run a positive trade balance in the US, with many UK companies making good returns. The increasing value of the pound also provides an opportunity for British firms to start selling into the US or to sell more. For the moment, nothing else has changed.
Stephen Roper is a professor of enterprise at Warwick Business School and the director of the Enterprise Research Centre, where this blog originally appeared.
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