This presentation aims to identify the agenda ítems that exporters to the UK and UK importers need to consider when designing futute marketing and pricing strategies post Brexit in 2019. This is for teaching purposes only-

1. Brexit
What are the implications for exporters
and importers?

2. Size of the UK economy
 UK GDP (2015) 2.858 Trillion USD
 Population 65 million
 For comparison purposes:
 Spain’s GDP 1.2 Trillion USD
 Population 46 million

3. UK Balance of Payments for trade in
goods (Data is for 2014)
UK Exports 472 billion USD
UK Imports 663 billion USD
Visible Trade Deficit 191 billion USD
UK has a trade surplus in services that
partly counterbalances its trade
deficit in goods.

4. Main UK exports
Cars
Gold
Petroleum (crude & refined)
Packaged medicaments
Services

5. Main UK Imports
Cars
Gold
Petroleum (crude & refined)
Packaged medicaments
Computers

6. UK’s main trading partners
For exports and imports:
 United States
 Germany
 France
 The Netherlands
 Switzerland
Only for imports:
 China (but China is also a foreign investor in the UK)

7. UK net trade balances for goods (trade
deficit) and services (trade surplus)

8. First conclusions about the UK economy
 The UK is a trading nation with an open economy.
 The UK relies on imports to meet the needs of its
domestic consumer market.
 The UK has historically run a trade deficit in goods.
 The UK relies on exporting services to counterbalance its
physical trade deficit.
 Foreign direct investment is also an important source of
foreign exchange for the UK, as is the income earned
overseas by UK companies and individuals.

9. How will Brexit affect trade between
the EU countries and the UK?
 The value of Pound Sterling has fallen and
may fall again against the Euro and the
USD.
 In the future, there could be import tariffs
on goods exported to the UK from the EU?
 The UK has declared that it will leave the
EU Customs Union, which has many
implications for future customs procedures
affecting importers of goods into the UK.

10. How will Brexit affect trade between
the EU countries and the UK?
• What “Rules of origin” will the UK apply to
imported goods?
• The UK’s financial services exports are at
risk, if and when, “passporting” is
eliminated.
• When will the UK conclude a trade
agreement with the EU?
• When will the UK reset its place with the
World Trade Organization (WTO)?

11. What happens when UK leaves the EU’s
single aviation market?

12. Gibraltar - Could Spain scupper a deal
with the EU on landing rights by
excluding Gibraltar airport?

13. Exchange rate – Euro Pound
Before the UK referendum, 1 Euro used to buy between 0.75
and 0.8 Pounds.
Since the referendum in June 2016, 1 Euro buys between
0.86 and 0.9 Pounds
This is a devaluation of Sterling against the Euro of between
11% and 13%.
Conclusion: Exports to the UK from the EU will probably
have to raise prices. This will cause a rise in UK inflation.

14. Discussion questions
 You are representing Spanish rice exporters who annually
export Spanish rice to the UK through the wholesale rice
market.
 How are you going to approach your contract
negotiations on prices for the current year (2017)?
 Will you recommend hedging (at a cost) your future
income in Sterling to secure its value in Euro because you
fear a further devaluation of Sterling?
 What strategy would you recommend adopting for 2018
and 2019 price negotiations with UK rice importers?
 Would you abandon the UK market in favour of other
markets with better price/income potential?

16. UK Trade in Services (2014 & 2013)

17. Will the UK’s pattern of trade change?
What will be the UK’s source of competitiveness?

18. What are the likely economic effects of
BREXIT on the UK economy after 2019?
 Lower Sterling exchange rate against Euro? What level?
 Rise in inflation? What level?
 Fall in purchasing power of UK consumers? How big a fall?
 Cost of tariffs?
 Cost of complying with customs procedures?
 Rules of origin issues?

19. Discussion question
 You are the export manager for a European
car manufacturer.
 What will be your future marketing strategy
for exporting vehicles to the UK?

20. Conclusions about the final impact of Brexit
on EU exporters with a UK market share.
 EU exporters to the UK face years of uncertainty.
 Devaluation of Sterling and its potential future vulnerability pose
pricing difficulties for companies exporting to the UK.
 Costs of importing goods into the UK will probably rise.
 The UK consumer is likely to start losing purchasing power and this
will lower demand in the UK consumer market.
 The UK government may adopt monetary and fiscal policies to
stimulate the UK economy after Brexit.
 Interest rates in the UK may rise to dampen inflation.
 Exporters need to develop a strategy and a plan to weather this
difficult passage of transition in exporting to the UK market.