The UK’s decision to leave the EU last month sent shockwaves through the British business community and the wider world. Many warned of reduced investment, cancelled contracts and even a mass exodus of firms from the UK. It seems an air of uncertainty will linger as the country undergoes the complex and protracted process of negotiating new trade agreements. But here at the Commonwealth Enterprise and Investment Council (CWEIC) we are trying to take a more measured view. We see opportunity – not least that of the Commonwealth emerging as a major group in the global trade space.
Of course, with the value of the UK’s exports to the Commonwealth standing at less than a quarter of its European trade, it is not a like-for-like replacement – and certainly no trading panacea. But comprising of diverse, dynamic and growing markets that come with a number of inbuilt advantages for UK companies, the Commonwealth represents a huge opportunity for British firms looking to maintain and build their exporting prowess after our withdrawal from EU membership.
Britain’s relationship with the Commonwealth has been a frequent talking point both before and after the vote, with Leave campaigners holding it up as an alternative to struggling European markets. Of course, to frame it as a binary choice is wrong. Our view is, and always was, that it is a case of both and not either-or. Indeed, there are (currently) three Commonwealth members who are also EU members: UK, Malta and Cyprus. Having said that, we see as very encouraging the recent interest in new free trade agreements (FTAs) from members such as India, Canada, Australia and Ghana. But no matter what happens at the higher-level, the Commonwealth already brims with potential for UK firms.
One aspect is its startling diversity. In fact, the Commonwealth is the most diverse collection of sovereign nations after the UN and the WTO, having geographical breadth and depth across South Asia, Southeast Asia, Africa, the Caribbean and the Americas, Asia-Pacific and Europe. Though the majority of its members are Least Developed Countries (LDCs) and Small, Vulnerable Economies (SVEs) from Africa, Asia, Caribbean and the Pacific, these are also high-growth countries with extraordinary opportunities. The Commonwealth also includes rich OECD countries such as Australia, Canada and the UK, and high-income non-OECD countries such as Barbados, Malta and Singapore. From a geo-strategic perspective, Commonwealth member countries also figure in major global forums such as the G7, G20 and the BRICS, as well as several regional trade groups such as NAFTA and the African Union.
Such diversity means that these markets offer a wealth of opportunities to UK businesses across all sectors. For example, its developed economies will have a high demand for advanced technology, pharmaceuticals and professional services, while the numerous developing markets of the Commonwealth are more likely to require products and materials related to infrastructure development. India is currently embarking on some of the largest and most ambitious infrastructure projects in the world, and the telecoms sector boom in a number of African Commonwealth countries looks set to continue. The geographical span also means that trading with one Commonwealth country can act as a perfect springboard into other global markets – perhaps their neighbours within the region.
But this diversity doesn’t mean that the Commonwealth is a jumble of assorted cultures, customs and languages. In fact, the opposite is true. This is because the UK is the Commonwealth’s “heart” historically speaking. This means that nations chose to join the Commonwealth based on their common heritage in language, culture, law, education and democratic traditions – all based on UK systems. Many of the Commonwealth’s leading decision makers are educated in the UK, and we are also home to the world’s largest Commonwealth diaspora. Most importantly, British brands are generally respected, trusted and widely recognised in Commonwealth countries – excellent news for UK companies looking expand into these markets after Brexit.
And all these commonalities mean lower barriers to trade for UK firms. Business costs are generally lower for intra-Commonwealth trade, and a shared language – combined with similar legal and accounting systems – can reduce trading costs by up to 20% for UK businesses. Not only that, the Commonwealth gives preferential tariffs to its member countries, including the UK.
Another aspect of the Commonwealth is its sheer size and demographic potential. In contrast to, say, the aging and shrinking working populations of Germany and Italy, Commonwealth countries are young and dynamic – of its combined 2.3 billion population, 60% are under 29. Standing at around £8 trillion today, the economy of the Commonwealth overtook that of the Eurozone in 2013, and is set to overtake that of the EU as a whole by 2018 – contributing 18% of global trade. By 2020, it will have 1 billion middle class consumers, 40% of the global workforce and trade between member countries is expected to double to £700 billion.
Given the current sluggish growth of the Eurozone, the Commonwealth offers a more dynamic and varied export market – one in which Britain has unique access. Our role at CWEIC is to help UK companies access these markets and make the most of the opportunities. We do this in a variety of ways – including via a digital trading platform, or a UK SME mentorship scheme (just two recent examples).
Commonwealth markets have deep commonalities, which provide naturally lower barriers to business and allow for the communication of complex ideas. The flourishing of e-commerce only accentuates these factors, meaning that UK firms have never had a better opportunity to profit from this truly 21st century network.