The ongoing challenge for business owners is staying ahead of anything that may negatively affect their company and trading conditions. There is no time for navel-gazing. Analysing the PEST (political, economic, social and technology) external factors usually offer up evidence to support new goals and allow a business to plan ahead. Hence, they get a head start on any event that can be a game-changer like Covid-19.
At BusinessBlogs, we often write on the topic of technology, and how it has revolutionised our lives and what we do commercially; however other external factors also play a core role in changing the face of business.
Economic, political or social change is equally as disruptive as the technology for business so, in this blog article, we look at some of the potential obstacles that may affect business in the short term.
The US Election result has calmed the West to focus on economic recovery and vaccinating against the Coronavirus and its variants.
Economic stimulus will continue, as will low interest rates to overcome the challenges faced globally with lockdowns and slow economic growth. Some industries may never fully recover to their pre-Covid level. Hence, businesses in these sectors need to focus on innovation and change management to operate efficiently with remote workers and eCommerce stores.
Trade wars are still a thing and one area of globalisation that’s not been affected by trade wars is services. Global services trade is expected to hit $7 trillion, which is about a third of global merchandise trade.
Top Exporters of Global Services
The five big players in global services are China, France, Germany, UK and US. China has recently taken over the fifth position from the Netherlands. Here is a list of the top 10 countries.
- USA (14.3% of global total)
- UK (6.5%)
- Germany (5.7%)
- France (5%)
- China (4.6%)
- Netherlands (4.2%)
- Ireland (3.5%)
- India (3.5%)
- Japan (3.3%)
- Singapore (3.2%)
How has Brexit impacted the services trade for the UK? The EU would absorb the largest share of exports, so if the UK and the Independent were downbeat about the economy saying Brexit will decimate the UK services industry so let’s see what’s happening now Brexit is the norm.
In 2018 41% of services trade went to EU members. While the EU trade is at stake so is the preferential agreements between Japan and Canada.
BBC spoke to a few businesses trading with the EU since Brexit, and the feedback suggests:
- UK businesses importing from the EU are paying more, and the costs are passed onto the customer
- Transport and logistics delays between UK and EU resulting in goods taking longer to arrive
- Paperwork, and compliance requirements a turn-off for EU importers of UK products
There is a lot of adjustment going on with everyone getting up to speed on the new legislation and adjustments to supply chain management. However, once systems have calibrated, trade between the UK and the EU will bounce back, though not likely to the same levels as pre-COVID19.
In pwc’s article, global trade was predicted to grow by 3.2 per cent in 2020, with all major economies growing due to favourable financial conditions. Did you know China was expected to grow at around 6 per cent, which is equivalent to adding that of Saudia Arabia to the world’s economy? True and in terms of global trade leaders, India’s rise, which is on a trajectory to become the world’s third-largest economy behind China and the USA by 2030. So what did happen? COVID-19 curtailed growth, turning an increase into a fall, albeit not as much as predicted. The end result was -5.3%, with a rebound expected in 2021.
Good news on the jobs front with 10 million new jobs expected from the G7 and emerging economies. Though China and Russia’s workforce bucks the trend with a shrinking workforce.
Will the population rise? Of course, we’re living longer, so we’re an ageing population with Japan leading the way as the ‘greyest’ country. Thinking of starting a business in 2021? Consider what you can do for the baby boomers and retirees.
Globally business and economies are experiencing unusual trading conditions. A top priority is that of a nimbleness, i.e. Trading nations need to be quick to change as markets and economies demand it.