Whilst Brexit and the pandemic have clearly had a notable impact on SMEs and international trade in products, there have been some recent indicative green shoots of recovery.
It is notable that exports from the UK to the EU have recently been returning to their pre-Brexit levels. Commentators have suggested this is a possible sign that businesses in the UK and EU have gradually adapted to the new regime under the Trade Agreement.
Additionally, the UK has signed free trade agreements with Australia (December 2021) and New Zealand (February 2022) since leaving the EU. More recently, the UK has opened discussions about possible free trade deals with Mexico and Switzerland. These agreements will encourage SMEs to consider expanding or relocating their supply chains into new territories with different opportunities.
These are, however, fairly early signs of recovery, and the challenges created by the Trade Agreement continue to impact the many SMEs whose principal international trading relationships are with the EU. The increased regulation and compliance under the Trade Agreement continue to place strain on SMEs who deal in specific products such as alcohol, cosmetics and electronics and which require a significant amount of paperwork.
Additionally, whilst commentators have noted the easing of Covid-19 measures, SMEs remain cautious about the ongoing impact of Covid-19. In particular, the uncertainty of the likely effect of different variants of the virus, as well as the notable difference in the approaches taken to measures in different countries across the world, continue to be a cause for vigilance. By way of example, the localised lockdowns in China continue to be strictly enforced and have created supply chain problems for importers, many of whom have made efforts to localise their supply chains as a result of the pandemic.
More recently, the current geopolitical situation in Europe has created further challenges for SMEs. As well as the humanitarian crisis created by the conflict in Ukraine, there have been considerable impacts on trade relations, with a sharp rise in commodity prices, sanctions and immense damage to infrastructure in Ukraine causing a vast array of complications.