Why despite some challenges, the timing could be right for UK Manufacturers to go international
Guy Hodgkinson · October 12th 2022 · read
In the current economy, it seems as though an ever-increasing burden is felt by UK businesses, and in particular Manufacturers trading with EU since the Brexit withdrawal in January 2020.
U.K. inflation hit 9.9% in August with the Bank of England projecting a peak of 13.3% before year-end, while the Pound continues to weaken against the US dollar and the Euro, all due to continued political instability and the energy crisis resulting from Russia’s war on Ukraine. However, despite the bleak outlook on consumers in this context, it does seem that the weaker currency could actually be good news for UK businesses.
Guy Hodgkinson, Partner at MHA, believes that there are some clear advantages available for those UK manufacturers willing to embark on an export strategy due to the weakness of the Pound versus foreign currency. A weak pound means UK exporters can sell their goods cheaper and thus increase profit margins. This relies upon companies adopting a flexible approach towards market conditions and to considering the following recommendations:
1. Consider which new markets may be attractive for your products
While imports have become more expensive, British exports are now cheaper and therefore much more enticing to other countries who seek to purchase UK products. To capitalise on this appeal, it is advised for British manufacturers to consider an export strategy. If you operate a company based mostly on domestic business, consider a change of focus and expanding overseas. If your business already has an international presence, more effort could go into raising your brand awareness in other parts of the world through marketing and social media strategies and recruiting new overseas partners.
2. Source suppliers in the UK
The weaker pound can result in expensive import supplies. For those Manufacturers who source local suppliers instead, this can have the effect of saving time, and cutting the cost of transport and import duties, thereby increasing profit margins – and also takes away any complications that could arise with foreign companies since Brexit. Essentially, benefiting from the UK’s unstable currency involves implementing protective measures while reaching out to new markets to appeal to overseas customers looking for a promising deal.
3. Evaluate any business advisory needs
When exporting, it is crucial to have a team of expert advisors on hand to help you to maximise your business’s profits.
Having an external expert partner to support you with the strategy stage of an internationalisation project can really help you understand the market dynamics, avoid any pitfalls and fully understand the tax implications upon your business, in short ensuring the venture remains viable and you can maximise your business’ profit margins.
MHA work seamlessly with manufacturing and engineering firms across the UK, offering a full range of business services and advisory services- from audit and compliance to VAT and Customs advisory and business planning. As the independent UK member of Baker Tilly, MHA benefits from its strong links to international business, and ability to source expertise as needed from all around the world to support its clients’ individual needs.
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If you would like more advice on how these tax changes could affect you, or would like to discuss any further tax matters, please get in touch with our tax specialists.