FTI Consulting International Trade Bulletin – 15th July
This Week In Trade
Conservative backbenchers have been up in arms this week over microchips – specifically the sale of the UK largest semiconductor plant to a Chinese-owned Dutch technology company. Elsewhere, the Trade Secretary has poured cold water on hopes for a quick post-Brexit trade deal with the US – warning the UK was unlikely to secure a deal before 2023. The government has also dealt a blow to the exporting hopes of British small businesses with the news that it intends to scrap the Tradeshow Access Programme which provides grants for SMEs to exhibit at international trade shows.
FTI’s Key Headlines
When the chips are down
The Prime Minister has overruled his ministers and ordered a review into the takeover of Britain’s biggest microchip plant by a Chinese-owned technology company. The PM has instructed the National Security Adviser, Sir Stephen Lovegrove, to evaluate the £65m sale of Newport Wafer Fab to Nexperia, a Dutch company owned by Chinese electronics company Wingtech. The move came following a backlash from backbench MPs who accused the Government of turning a blind eye to efforts by China to dominate the semiconductor market, a crucial component of modern electronics.
The current global chip shortage is making many governments nervous – with a shortage of semiconductors being blamed for an unexpected drop in the eurozone’s industrial output. According to Eurostat the bloc’s industrial output fell 1% in May and factory output levels are currently 1.4% lower than they were before the pandemic in February 2020.
The primary reason for the current state of the market is due to the dominance of a small number of firms in their production. An industry split between companies that focus on either designing or manufacturing chips, designers focus their resources on research and development, with the most successful licensing their design schematics out to companies like Apple, who adapt them for their products, who in turn, outsource manufacture. With only three companies, Samsung, Intel, and Taiwan Semiconductor Manufacturing Company (TSMC)capable of producing the most advanced chips, it is an oligopoly that benefits from excess demand.
US firms bullish about Britain
A study released this week has shown that US companies have very high confidence in the UK as place to do business despite the challenges posed by the pandemic and Brexit. The BritishAmerican Business trade association surveyed 68 large cap American companies, who together employ more than 275,000 workers in the UK, for their inaugural Transatlantic Confidence Index. The Index will track the confidence and views of US companies who operate in the UK, particularly concerning their interest in investing in UKPLC and Britain’s relationship with the US and the EU.
Around 60% of respondents revealed their intention to increase their investment in the UK over the next two to three years and a 1/3 rated their confidence at 9 or 10 (on a 10-point scale). Many executives expressed some concerns about the current state of UK-EU relations with 40% ranking improving relations with the EU as the UK’s number one priority to maintain its top ranking as a destination for US investment.
Nevertheless, Trade Secretary, Liz Truss this week warned that the UK was unlikely to strike any trade deal with US before 2023 at the earliest. The announcement poured cold water on ambitions for Truss’s five-day visit to the US to discuss closer cooperation on tackling threats to free and fair global trade.
For British SMEs the show won’t go on
Some bad news for UK small businesses which seek to go out and make a success of Global Britain with reports that the Government is planning on scrapping the Tradeshow Access Programme. The Department for International trade has told business groups that the organisation, which provides grants for business to exhibit at international trade shows, is to be shut.
The return on such investment is of course difficult to quantify, with skeptics associating them with businessmen and politicians going for an expense paid holiday. Considering that most small exporters from the UK are successful because they can bring to market world-leading and high-value-added products, trade shows do at the very least provide a material showcase for Global Britain.
Whilst the Government’s need to reign in public spending is growing, the timing and optics of this move sit uncomfortably with the Global Britain agenda. Trade groups have already expressed their dismay at the decision – referring to it as a “retrograde and short-sighted step for British exporters, especially SMEs.” Not exactly a glowing endorsement for a buccaneering Global Britain or indeed for the Prime Minister’s commitment to level-up the country and support smaller businesses.
Contact Us
FTI Consulting’s UK Public Affairs team works with clients of all sizes, and in all sectors, to design and deliver bespoke programmes which strengthen reputation, protect and promote interests, and generate commercial and political capital. Our approach is underpinned by our unrivalled understanding of the public policy environment and thinking of senior decision-makers, combined with sector-specific expertise and experience in delivering integrated public affairs and communications strategies across international borders and party-political lines. We offer our clients a unique advisory experience, drawing not only on the expertise of the core Public Affairs team but also FTI Consulting’s broader experience as one of the world’s largest, independent global business advisory firms.
If you would like to understand more about how we can help you, please contact Alex Deane at [email protected], Josh Cameron at [email protected] or Ollie Welch at [email protected].
| The views expressed in this article are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.
©2021 FTI Consulting, Inc. All rights reserved. www.fticonsulting.com |
