Three months on from the UK's decision to leave the European Union and there is still much uncertainty about the impact of Brexit. Following a Clyde & Co survey with over 50 Senior Executives it was clear that the lifting of Iranian sanctions is the most likely to impact global trade. We discuss the results below.
Withdrawal of Iranian sanctions the top concern for global trading businesses
The withdrawal of Iranian sanctions will have a greater impact on their businesses than Brexit negotiations and the upcoming US Presidential election. The survey showed that 40% of senior executives at global trading companies believe that the lifting of Iranian sanctions will have a more profound impact on their business over the upcoming financial year.
Iran: issues remain
While the withdrawal of Iranian sanctions could provide a huge windfall for businesses, there is a raft of issues that are currently stopping companies from trading with the country.
One of the key barriers is access to finance. Despite reassurances from OFAC most banks are still very reluctant to finance businesses involved in Iran. So far, the European tier one banks have shown zero appetite for conducting Iran-related business. This means businesses are unable to access credit to fund their business with Iran.
Businesses that do manage to access finance must consider the level of due diligence involved in trading with a country whose economy still has close ties to of individuals and entities that are listed by the EU/UK and US, including the Islamic Revolutionary Guard Corp.
The impact of Brexit negotiations on global trading companies
Over 40% of businesses said that post-Brexit the outcome of global trade agreements would have the most significant impact on their business. Trading companies operating within either the UK or EU are likely to feel a significant impact to their business once the UK negotiations with the EU are completed.
For trading companies that operate outside of the EU and UK, Brexit may not have a direct impact. However, as senior Government officials have made clear, the UK is looking to establish new trade agreements with non-EU countries. Once these ties are established, they may have a significant impact for businesses operating elsewhere.
Entry into new markets a priority for businesses
In light of current market conditions, the most popular strategy Senior Executives regard as a priority for their business is entry into new growth markets (36%). This was followed by embracing new strategic partnerships (26%) and restructuring (17%).
The full impact of Brexit on global trading companies remains to be seen. It is understood that these businesses will be waiting to get a better indication of the outcome of the negotiations before deciding how best to play their hand and adjust their business models. Additional shifts in trading relationships and trade corridors will also arise from the commercial direction of individual firms, multinationals and major supply chain anchors, as they re-assess the evolving place of the UK on the map of global trade.
Footnotes
* [50] Senior Executives of global trading companies were surveyed. The companies operate throughout The Americas, Europe, Asia, Africa and Australasia
The New Reality For Global Trade
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