State of the Region: International trade is key driver

INTERNATIONAL trade is being heralded as a key driver for rebalancing the economy, but are West Midlands business leaders planning to increase exports in 2012 given the crisis in the Eurozone and other global markets?

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Ongoing issues in the Eurozone, as political leaders look to stabilise economies in Greece, Italy and other countries plagued by huge debt levels, has created major headlines.

Chancellor George Osborne yesterday told the House of Commons that the Eurozone crisis was based on a lack of confidence in the ability of countries to deal with debt.

But has the situation created opportunities, rather than challenges, for West Midlands companies to increase their international presence and have the emergence of the BRIC (Brazil, Russia, India and China) economies fuelled possibilities for growth?

[FORM: 53]

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Mark Beardmore, right, managing partner at DLA Piper’s Birmingham office, said a proportion of the UK’s economic recovery over the last 18 months had been driven by growth in export markets and said the government had made steps to promote and support activity here.

“But with renewed economic turbulence in Europe and the US, this is looking increasingly fragile in these traditional markets,” he said.

“The relative weakness of the pound, exacerbated by further quantitative easing, should give UK-based companies an increased edge in export markets, but the Euro has remained remarkably resilient and, in any event, there is a narrowing window of opportunity to exploit this.”

Mr Beardmore said there was continued concern exchange rates would impact unfavourably on international exports and, if a loss of confidence in the euro drives investors towards the sterling, it could lead to a less favourable exchange rate implication for British exporters.

“Whilst the Eurozone is still a vital market for the UK, many businesses are looking beyond those parameters with countries like China emerging as prime targets. It will be interesting to see just how many West Midlands businesses feel they will be affected by the Eurozone crisis and what proportion are putting plans in place to combat and diversify by exploring emerging markets.”

[FORM: 53]

Phil Harrold, partner and overseas investment expert at PwC in the Midlands, said: “While the Eurozone crisis is showing no signs of letting up, economic growth forecasts in BRIC economies are soaring away – a recent PwC report has forecast these countries will account for 40% of world GDP growth during 2011 and 2012.

“For Midlands businesses, the time is right to focus on increasing export activity. Of course, there will be some companies that are considering exporting their products and services to countries like China and India for the first time and, while support and advice will be needed, it is definitely not too late to consider stepping up export activity. There is little to lose and plenty to gain by acting now.”

[FORM: 53]