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Businesses in Canada and the UK should act now to grasp the opportunities of a potential FTA

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25 August 2022

Written by
Jenny Duni

Written by Pedro Barrio, Senior Head of Desk at Ebury Canada and Phil Monkhouse, Head of Sales at Ebury UK

The ambitious negotiations for a new bilateral Free Trade Agreement between the United Kingdom and Canada could offer businesses exciting opportunities on both sides of the Atlantic – but only if they have the right foundations in place.

The UK and Canada have long enjoyed a strong trading relationship with one another as two of the largest economies and as like-minded Western partners collaborating closely on a range of global issues from security and intelligence to climate change, health and emerging technologies.

The strength of this alliance is born out in the data.

The UK is Canada’s third largest trading partner and goods & services totalling over £19 billion flow between the two countries annually. Moreover, there is already scope for considerable future expansion of trading volumes: Canadian demand for imports is set to grow 45% by 2035 while Canadian-owned businesses employ over 100,000 people across the UK.

A successful conclusion to the current negotiations would further reduce barriers for goods exporters, boost the UK’s world-renowned services sector and stimulate greater Canadian investment in the UK.

An agreement would also provide Canadian businesses with continued preferential access to the UK, primarily benefiting Canadian exporters of goods and services

Taking advantage of growing trade between the UK and Canada

Given the strength of the current trading relationship, with over 10,300 UK SMEs already exporting goods to Canada, and the likelihood of further growth, it is evident that there is a great opportunity for importers and exporters to grasp in both countries.

But businesses must have the right building blocks in place if they are to make the most of the sunny prospects coming over the horizon.

Varying Central Bank approaches to tackling rampant inflation have driven volatility in currency markets. Businesses should, therefore, be equipping themselves with the tools to hedge FX risk over the short, medium and long-term.

This will provide immediate stability of price, certainty over business investment and greater confidence around the ability to achieve ambitious commercial objectives.

Likewise, setting up local currency accounts can help businesses collect payments like a local to help build healthy, productive relationships with suppliers and buyers. It reduces friction and cost while avoiding the necessity for a corporate presence to collect payments locally.

Businesses with a presence in both countries will also need to have mechanisms in place to make multi-currency mass payments to their employees and suppliers on time and in the right currency. Making errors in this area will worsen all-important relationships with suppliers and risk an unproductive, unhappy workforce with high turnover rates.

In a difficult economic period where lending can be more difficult to obtain, having corporate banking partners that can provide flexible finance solutions to support businesses with their international trade activities will also be a big driver of development.

All these factors may seem straightforward, but there is an array of providers that provide a very wide-ranging level of service, consistency and quality. Errors can have seriously damaging consequences.

Getting the basics right is the key to future success and growth, which means partnering with the very best service providers.

What does this look like in action?

The pandemic, ongoing supply chain crisis and global inflation shock experienced over the past 30 months are a great example of how these services work in action to shield businesses from damage.

At Ebury, we have supported thousands of businesses to become more efficient in their operations and witnessed first-hand how it can enable them to deal with these headwinds.

One of the first challenges we noticed for importers in the second half of 2020 was the sharp rise in shipping costs. This forced companies importing from overseas (especially South East Asia) to assume an important reduction of their operational margins – which was initially hoped to prove only temporary.

Ebury’s consultative and tailored approach to FX risk management helped businesses protect their bottom lines against currency risk during this period of extreme uncertainty. We provided them with peace of mind and, in many cases, even helped mitigate some of their rising operational costs.

A second example was the additional indirect, unidirectional FX risk posed by trading with China in USD which contributed to imports that were up to 18% higher in price – Ebury helped their clients alleviate or, often, completely avoid these price rises.

Thirdly and finally, as raw material shortages and transport scarcity further disrupted global supply chains, we started noticing many Canadian companies having to renegotiate their payment terms with suppliers.

This was to help them become a more attractive client and, therefore, improve production line and shipping timings.

However, it meant offering payment terms that were more attractive to overseas exporters – normally in the form of higher initial deposits or even payments in full to go into production.

Ebury Canada’s Trade Finance credit line helps importers looking for alternative forms of supply chain financing to support this change by covering their import and shipping costs and offering up to 150 days to repay.

Given Ebury’s extremely competitive and tailored pricing, our trade finance product has become ever more valuable for Canadian importers in a world of increasing interest rates.

Ebury – your partner of choice for simplifying international trade

Ebury has firmly established itself as the provider of choice for businesses trading internationally looking for reliability, security and outstanding customer service.
Headquartered in London – one of the busiest commercial and financial hubs in the world – and with two offices established in Canada (including the recent opening of its Vancouver base), it is ideally placed to support growing trade between the two countries.

Ebury provides a one-stop-shop of services for businesses from FX risk management and international payments to local accounts and flexible lending solutions. Its dedication to customer service has seen it rapidly expand its global footprint to support clients with local know-how.

The strategic investment from Santander also bolstered Ebury’s international presence and supported further investment in the technologies underpinning its market-leading global transaction banking platform.

With trade between the UK and Canada set fair for continued growth over the coming decades, Ebury’s ability to dependably take care of all the services required to simplify international activities will be invaluable for businesses looking to take advantage of an increasingly busy trading channel.

For more information about Ebury’s services please contact Pedro Barrio in Canada ([email protected]) and Phil Monkhouse in the UK ([email protected]).