There was a sense of inevitability that Brexit trade negotiations would go to the wire, with representatives from both the UK and the EU slavishly working towards an agreement as the December deadline approaches.
Talks have continued at the beginning of this week, and while a major breakthrough appears to have been made in terms of EU access to the UK’s fishing waters and 200-mile exclusive economic zone, much is to be done to break the existing impasse concerning the so-called “level playing field”.
In this post, we’ll explore these talks in further detail, while asking how commodity traders and businesses can prepare for a post-Brexit world.
Brexit Uncertainty and its Impact in the UK
Ultimately, the issue of creating a level playing field between the EU and the UK reflects the single bloc’s desire to safeguard the integrity of the single market, with the former concerned that the latter could undercut environmental and labour standards in a detrimental manner.
However, the UK wants to retain the freedom to adjust and alter such standards as it sees fit, and this impasse has created a significant deadlock in ongoing talks and hiked the level of uncertainty across a wide range of marketplaces.
Make no mistake; the prize on offer is tariff-free trade in goods, which remains one of the biggest benefits of being a member of the single bloc.
More specifically, a no-deal Brexit would ultimately see the introduction of potentially costly tariffs of certain goods and commodities, impacting a raft of businesses across numerous industries.
Of course, this betrays the wider issue of the UK’s economic structure and the potential impact on service exports (the EU accounts for the vast majority of the service exports which dominate our economy), but the uncertainty facing commodity firms and traders is palpable in the current climate.
How to Cope With the Challenges Faced by Commodity Traders Post-Brexit
In wider terms, a recent RAND Europe study has found that the UK GDP may have already decreased by £4.4 billion by the end of the transition period on December 31st.
This means that the economy will be approximately 0.17% smaller than it would have been without leaving the EU, with this largely due to the uncertainty that surrounds trading in goods and products.
This, when combined with global trade tensions, has helped to precipitate a significant decline in sales for manufacturing exporters in the UK, alongside noticeable falls in orders and reduced cash flow.
Undoubtedly, this increases the risk of orders going unfulfilled and unpaid, while it also compounds the high-volume nature of commodity trading and the unsecured credit terms often associated with this method of buying and selling.
With this in mind, it’s crucial that commodity traders seek out effective protection against the risk of non-payment and non-delivery for individuals who are active within the commodity value chain. This is available through insurers such as Gallagher, who can help to provide significant reassurance and underpin trade deals with greater speed and efficiency.
While this step cannot help to completely negate uncertainty or the various impacts of Brexit, it will help to safeguard the value of commodity orders and provide a level of protection against non-payment or non-delivery.
