Internationally focused businesses in the Channel Islands and Isle of Man need to demonstrate their ability to adapt as political headwinds threaten to disrupt global trade patterns, according to HSBC's Head of Commercial Banking in the Channel Islands and Isle of Man, Warwick Long (pictured).
An HSBC survey of over 8,500 companies in 34 markets, Navigator: Now, next and how for business, published this week, shows that businesses around the world are upbeat about their prospects, encouraged by customer demand and favourable economic conditions, but are revising their strategies as protectionism dents the outlook for international trade.
The report finds that more than three quarters (78 per cent) of companies are positive about the trading environment, rising to 86 per cent in ASEAN countries and 82 per cent in the EU.
Yet at the same time, political headwinds are gaining strength as 63 per cent of firms think governments are becoming more protective of their home economies.
China and Hong Kong links
For companies with a negative outlook on their prospects, tariffs and the US-China trade dispute are the main reasons for pessimism (31 per cent each). In mainland China and Hong Kong, with which Guernsey, the Isle of Man and Jersey have built strong links, the political dispute with the US is the greatest concern (65 per cent and 53 per cent respectively).
Reflecting these uncertainties, many companies are turning their attention to intra-regional rather than inter-regional trading opportunities. Asked about their top targets for trade growth, for instance, the number of European companies citing Asian markets dropped from 26 per cent in the first quarter to 13 per cent now. At the same time, more Asia-Pacific companies are looking at China as a future growth market.
Warwick Long commented: “Businesses are staying positive, but they’re signalling to policymakers that protectionism is a significant concern that’s reducing their appetite to grow through international trade. Some are looking closer to home for opportunities, and many are adapting their approach to stay fit for the future.
“For globally dynamic businesses in the Channel Islands and Isle of Man, this means that now more than ever, they need to show their understanding of global markets and demonstrate an ability to adapt.
"As IFCs immersed in cross-border trade, these findings are particularly pertinent for financial services firms and those who have invested heavily in building relationships with overseas markets such as China. There are challenges but also real opportunities, and those that can best demonstrate their agility will emerge the winners.”
Skills and technology
The report also finds that businesses are placing a real emphasis on skills development and productivity enhancements, with 22 per cent businesses having invested in research and technology over the last two years, 75 per cent looking to data to drive business optimisation and 26 per cent considering technological advancement as the top reason for choosing a supplier.
Warwick added: “All sectors in the islands should sit up and take notice of these findings. This report strongly suggests that technology, digitisation and data will play an increasingly important strategic role by enabling businesses to develop their products and services, reach new customers and cut costs by improving operational efficiency.”