# Global Trade Masterclass - Textiles and Apparel

https://www.youtube.com/watch?v=yfbixf1TF7Q

[00:00] It's all about um textiles and apparel.
[00:02] So, all I'm going to run through today is um kind of current state of play.
[00:09] So, um let me just make sure that you're not showing Mia and it's me that's showing.
[00:16] So, okay.
[00:18] So, um the current state of play.
[00:22] So what our understanding is of the sector currently and then we're going to run through some of the challenges um that the sector is facing and particularly through a global lens.
[00:33] So we're going to focus on the the bureaucracy and costs in global trade particularly since Brexit now that we're importing and exporting um to the EU and from the EU.
[00:42] Um some of the ideas around removing some of the friction from that UK EU trade.
[00:47] Um we're going to look at the what we call the preferential trading landscape that the UK has in place now.
[00:55] So um we have over 70 trade agreements in various different levels
[01:01] Of ratification that have been signed with countries around the world.
[01:05] And another 70 what we call unilateral trade agreements whereby we zero rate or reduce the import duty from certain countries that are classed as being developing countries to help them boost their industrialization strategy.
[01:25] We'll talk about accessing overseas labor and skills because labor is a big issue for the sector at the moment.
[01:32] Getting a hold of those people that can help boost our capacity.
[01:34] We'll talk about currency risk exposure.
[01:36] That's a big one in global trade.
[01:39] And we'll talk about these last two are kind of linked, the changes that we're seeing in customer buying preferences and that's linked to sustainability and that circular economy.
[01:53] We're starting to see the generation Y and Zed place an awful lot of importance on sustainability when deciding which brands to go with.
[02:04] There's a lot of regulation either on the way or already implemented that is kind of like going to force the hands of some companies at some stage.
[02:12] And then I'll talk a little bit about the fully funded program, which is a series of one-to-one support, peer support, the whole lot.
[02:25] We'll cover that off so that after today's webinar, if you want to have a one-to-one with us and perhaps enlist our services to do some research for you or some kind of, you know, whatever that might be, it'll be very specific to your organization.
[02:41] Then there is funding available to allow us to do that without you incurring any costs.
[02:49] So we'll cover that off at the end as well.
[02:51] So because there's just a couple of us, I'm just going to run through some of these slides.
[02:58] So in terms of the makeup of the sector, retailers make up the predominant share, and I'm not sure at this point because we haven't really had a...
[03:05] Discussion as to where you guys are coming from, whether you sit within manufacturing or retailing, but it's a sizable sector that means an awful lot to the UK economy.
[03:16] You know, it employs more than 64,000 people.
[03:20] Um, and it's made up predominantly of what we call micro businesses.
[03:24] So, under 10 employees.
[03:26] There's a total of just over 34,000 um businesses in the textile sector currently.
[03:32] But it's a sector that's facing um a lot of change.
[03:37] It's a sector where we see quite a significant trade deficit, meaning that we import um I'm just letting somebody else in here.
[03:44] Meaning that we import um some 18.8 billion pounds more than we export.
[03:52] Now that's probably due to the nature of our supply chains and so on, but it is one of the sectors where um you know if you compared it to financial services for example whereby we export more financial services than we import um textiles is
[04:06] Something that a sector where we see a deficit.
[04:08] Um, and I think, you know, not just co that kind of wrote 10 billion pounds um off the kind of like sales of goods.
[04:20] So that was a big enough shock for for um companies in the sector.
[04:26] But then Brexit, it's kind of like a double whammy really.
[04:29] So you know the aftershock of Brexit has seen a lot of UK um manufacturers and sometimes retailers in terms of looking for fulfillment centers over in the EU.
[04:41] They started to think about relocating or moving their operations to the EU to try and overcome some of the logistics and staffing and manufacturing um issues that they've encountered.
[04:53] Letting somebody else in, forgive me.
[04:57] Um and you know the there was a a survey done by Retail X fashion sector that actually um gave percentages.
[05:03] So 25% of those
[05:08] That had been, um, interviewed said that, um, they would consider relocating entirely.
[05:17] Some 39% said they would move to the EU if they were offered some kind of tax advantage.
[05:23] And 91% said that they would take advantage, um, of, uh, a visa scheme if it was offered.
[05:29] Again, just kind of like showing us the levels of talent and skill, um, shortage and issue that the sector is facing.
[05:37] Um, but then there's a whole load of other things that, that, um, Brexit has, um, thrown in our way as well.
[05:43] So we've got the case of double duties because the UK trade and cooperation agreement doesn't work the same way as free movement of trade — uh, free movement of goods, sorry.
[05:54] So say you were importing goods from China, you would pay import duties, um, when the goods come into the UK because there's no bilateral trade agreement with China currently.
[06:05] And then when you export them to the EU, unless you've processed them some way in the...
[06:09] UK, your EU customer then pays um that third country duty as well.
[06:15] Now, we'll talk about how you can um how you can overcome that sometimes um on one of the later slides, but that double duty scenario is a big one and it's made us, you know, if we bring goods in from overseas via the UK and simply ship them out to the EU without any processing, it's made us less competitive um because obviously of that that double duty.
[06:40] Um we're seeing a large number of um and I'd be interested to know if you guys have experienced this as well canceled orders um as a result of Brexit and as a result of kind of like the the UK trade and cooperation agreement bedding in um those customs controls and customs declarations have increased costs significantly.
[07:02] Um so you know we're hearing um a lot about that and then of course we've had the increased freight costs as a result of of co which are still you know astronomically high um
[07:13] And you've got to make that decision.
[07:15] Do you absorb that cost and impact your margin or do you offset it to the customer?
[07:21] And it's been a really really challenging time but then we've had supply chain disruption through co and and so on as well.
[07:28] And then this change or shift in consumer buying preferences.
[07:31] So there's an awful lot um going on at the moment that that companies in this sector have got to grapple with and get their heads around.
[07:39] But I just thought like we said at the very beginning we'll um go through some of these and I'll share with you some things that you can do some of which you might have thought about some of which might not have occurred to you and we can help you with all of it essentially.
[07:53] Um so the in terms of the bureaucracy and increasing cost particularly if we think about um trading with the EU because historically trading with the EU has been as easy as trading with another city in the UK.
[08:08] We've been local companies um towards each other and now we're actually third countries.
[08:12] We're a third country in the eyes of the EU and
[08:15] The EU is a third country in the eyes of the UK, and that's very different to free circulation of goods that we all enjoyed previously.
[08:24] Um, so I think there's a couple of things.
[08:25] There's, you know, make sure that your cost efficiencies and transport are being realized.
[08:29] So, you know, where possible, if you can increase the volume, say you're importing goods or exporting goods, if you can increase the volume and move away from air freight, which is astronomically expensive towards groupage loads on containers, for example.
[08:45] You don't have to purchase in container loads.
[08:47] You can share transport with other, um, other traders.
[08:51] Um, are there, you know, do you have, um, relationships with other companies in the sector that you can start trying to find some, um, synergy in your, your, your buying so that you can share space in containers or, or you know, groupage loads?
[09:07] Um, consider sourcing from alternative overseas markets.
[09:12] So I'll talk a little bit about China in, in a bit, but China used to be the one of the go-to markets.
[09:17] Um, and China's actually positioned itself now as being responsible for some 19% of global supply across multiple sectors.
[09:28] So, obviously when COVID happened and China's supply chain fell down, our supply chain fell down as well.
[09:34] So, a lot of companies are starting to think outside of China and start to source other suppliers and the likes of um Myanmar, which obviously is subject to EU trade sanctions at the moment, but the UK hasn't implemented those currently, but Myanmar, Vietnam, Pakistan, and so on.
[09:53] And those kind of because those countries are emerging countries, we don't typically charge import duty on the goods that we receive from those countries.
[10:02] So there's a cost saving there.
[10:04] Whereas pretty much everything that we import from China is subject to third country duty.
[10:10] Um look at duty deferment accounts and imports.
[10:12] If you are importing, you can obtain what's called a duty deferment account that allows you to defer any import duty.
[10:21] And pay HMRC that 30 days later.
[10:24] Now, if you have your own duty deferment account, you are not using a clearance agent's duty deferment account, which they'll typically charge you a facility fee for anywhere between 3 and 5%.
[10:37] Some of them cap it so it doesn't get too high.
[10:41] But that's another cost saving.
[10:44] Postpone VAT accounting.
[10:44] So, any VAT registered business importing in the UK will have to pay import VAT.
[10:50] Letting somebody else would all have to pay import VAT on the goods that they import.
[10:58] But you don't have to lay out that cost to clear the goods.
[11:00] You can have it deferred against your VAT account, which means that you retrieve monthly statement from HMRC telling you how much import VAT you've incurred in that month.
[11:13] And depending on your revenue, you might do your VAT returns every quarter or you might do them every month.
[11:18] And that's when you account for that VAT and it kind of cancels itself out as VAT does.
[11:23] Um so there's a couple of things to help with cash flow and working capital.
[11:28] And then um custom special procedures kind of like the jewel and the crown that so many UK importers aren't aware of um is if you're importing goods and you're um there's a whole raft of them.
[11:41] If I talked about one which would be inward processing for example if you're bringing in raw material or fabrics or whatever into the UK to go towards producing a different finished article so an item of clothing for example then you can suspend any import duty and VAT while you're doing that processing.
[12:03] Now if those goods are subsequently reexported so therefore your export markets then that import duty and VAT is never payable.
[12:10] It just gets written off.
[12:13] And similarly if you're um selling those goods on the UK market it's at the time when you finished manufacturing the goods that you pay that um import duty.
[12:25] Or that and it's on the finished goods rather than on raw materials.
[12:30] So that's just one example of customs procedures that um HMRC offer.
[12:35] There's no cost for being authorized for that.
[12:37] It's just applying um and it's just ways of kind of like limiting cost, limiting um the impact on cash flow and so on.
[12:46] And it's it's really important that we spread the word particularly in sectors where margins are being um you know really constricted so that we find every opportunity to save costs.
[12:59] Inward processing and other customs procedures are things that we apply for on behalf of um clients all the time um as part of the program that that we're doing for the East Midlands Growth Hubs.
[13:10] The other thing is explore multicurrency accounts.
[13:13] So um you know we've seen a very um weak pound probably since we made the decision to leave the EU.
[13:22] Now a weak pound is great for exporters.
[13:25] It makes us you know very competitive in our destination markets.
[13:27] Um, but it's not so good for importers.
[13:30] So exporters will typically invoice in uh GBP in sterling, but importers are typically invoiced in the source country's um currency, which leaves them exposed to those fluctuations and has a big impact on on margins.
[13:47] So explore multicurrency accounts.
[13:50] So um you know that way you can decide um when to send, when to spend money at that optimum rate um rather than when it when it's dictated um to you so to speak.
[14:05] Um look at third party financing options that can help cash flow and working capital.
[14:09] So um the likes of Booby Financial Services and UK export finance, which is a government um driven body, they offer um invoice financing for example, whereby if you accept a a large invoice um sorry you accept a large order from an
[14:27] Overseas client and you're kind of dependent on that money coming in in order to, um, you know, get the order ready.
[14:39] So you need to purchase raw materials and so on.
[14:41] You're dependent on recognizing that invoice revenue sooner, but you've maybe to be competitive and win the deal.
[14:49] You've offered extended credit to that client overseas.
[14:52] The likes of Bibby Financial Services and UK Export Finance will step in at that point and they will pay the invoice, um, immediately and they will recoup the funds from your customer.
[15:03] Now there's a small charge to pay.
[15:05] Nothing is free in this world, but it can be the difference between you, um, kind of having the working capital to deliver an order, um, for a customer and actually having to turn it down because you, you just can't finance it.
[15:22] Um, and the other thing is, you know, look at that product positioning in the market.
[15:25] Consider whether there's any elasticity in your
[15:28] UK and export um market pricing.
[15:31] All of the research that's been done recently around um you know those generation Y and Zed demographics suggests that for sustainable linked brands or or brands that they feel share their sustainability values, they're willing to pay um an uplift in price.
[15:53] So that would suggest that there is the the opportunity to actually offset some of these um increased costs through bringing more sustainability into the business to the customer because they're willing to pay that premium for something that they seem they they see to be um sharing their values and not just a case of greenwashing which we've seen a lot in the textile sector over the the last few years.
[16:18] So that's just a way of kind of like looking at bureaucracy and and costs and things that you might like to think about.
[16:25] Um in terms of removing that trick that friction from UK EU trade, it's a tricky one.
[16:28] We're kind of
[16:31] What are we two and a half years into this new way of working with the EU?
[16:36] Um, and I think it's placed an awful lot of burden on you guys as what we call importer of record or exporter of record.
[16:47] You're kind of like the legally responsible entity for making sure that your imports are declared correctly and your exports are declared correctly.
[16:57] Um, there's lots of support out there.
[17:01] Um, we provide training, for example, as part of this program to help you understand what is required of you, make sure that you're compliant with overseas regulation and HMRC regulation.
[17:15] Um, so there's a lot of support out there, but it's really important now you're not just a local company to other companies in the EU.
[17:24] We are exporters and importers, and that carries a certain level of liability and responsibility with it.
[17:28] Um, incot terms, something if...
[17:31] You've only ever traded in the EU.
[17:33] You've never had to worry about before.
[17:35] Um, but now we have to use Incot terms.
[17:37] And for those of you unaware, they are, um, there's 11 of them in total, and they're kind of three-letter acronyms.
[17:44] We love our three-letter acronyms in international trade that denote essentially who bears responsibility between the buyer, so the importer, and the seller, say the exporter.
[17:56] And it determines, um, who pays for transport, who pays for insurance, who has to clear the goods when they arrive in the UK, who has to, who's responsible for, um, doing the export declaration in the source country.
[18:11] And it's really important that we use the correct Incoterms.
[18:16] So if any of you on the call are unsure of what they are or how they impact you, let's book a call and we can go through them and make sure that you're compliant from that perspective.
[18:27] Um, become really familiar with the, um, import and export declaration.
[18:29] It's essentially the same.
[18:31] document.
[18:31] It's what we call a CAT8 or a single administrative document.
[18:36] A sad document, um, for those of us in the know.
[18:38] And it is quite sad when you're filling them out, but hopefully it's an agent that you have working on your behalf, um.
[18:43] But become familiar, and again that's stuff we can help you with in terms of what fields are filled out, because you are ultimately responsible.
[18:50] Even if you're using an agent, they'll work for you in what's called a direct capacity, a direct representation capacity, meaning that, um, so long as they have carried out your instructions to the letter of the word, they bear no liability for an incorrect declaration.
[19:08] So, become familiar with what fields are completed on an export declaration and which ones on an import declaration.
[19:17] Nobody's asking you to do it, but just become familiar so that you can actually check their work and make sure that they're representing you correctly.
[19:26] Um, the UK tariff and the EU common external tariff.
[19:29] That before Brexit, we all used the same tariff, which is basically a
[19:33] List of um all of the commodities that you can possibly think of in terms of goods that we ship globally.
[19:41] And um because we were part of the EU, we applied the same import duty um on everything that came into the customs territory, the 28 member states.
[19:51] But since leaving the EU, we now have a separate trade tariff which has allowed the UK government to um what we call liberalize certain tariffs.
[20:01] So they might have reduced um the import duty on certain tariffs or they might have zero rated it.
[20:07] They haven't done any of that for textiles.
[20:11] Textiles is still a big um revenue generator for for HMRC unfortunately that the the import duties are some of the highest that we see across the tariff.
[20:20] But become familiar with the duties that are being applied.
[20:22] And again, we can go through this on a on a one-to-one kind of like practical call.
[20:26] Share my screen, show you where to look.
[20:28] Be familiar with the import duties that are applied to the products that you're bringing in.
[20:32] And similarly, when
[20:34] you're determining your export pricing
[20:36] for the EU and making sure that you're
[20:38] competitive in the EU, you understand
[20:41] the duties that will be applied um on
[20:44] import into the EU. So you need to
[20:46] become familiar with that certainly for
[20:48] scheduling your export pricing making
[20:50] sure that you're remaining competitive
[20:52] because we that's big focus of what we
[20:54] have to do now. We've become it's become
[20:57] um more troublesome to deal with us. Um
[21:00] and so now we have to make it easier for
[21:03] those EU consumers and businesses to buy
[21:06] from us. Um understand the process for
[21:09] importing and exporting your goods.
[21:12] Textiles are all what we call standard
[21:13] goods. Typically, there's no um
[21:17] non-standard goods. When I talk about
[21:19] non-standard goods, um we're usually
[21:21] talking about food products where
[21:22] there's tight regulation or products of
[21:25] animal origin or live animals, um some
[21:27] plants, wood products. They're um
[21:30] non-standard goods, but you guys are
[21:32] probably just in the standard goods
[21:34] category, but there are still
[21:35] requirements. So, if you're exporting,
[21:38] you still need to issue a commercial
[21:40] invoice to your customer. you still need
[21:42] to issue a packing list. Um, and you
[21:45] still need to have that export
[21:46] declaration to move goods into the EU.
[21:49] And flip it around the other way. In
[21:51] order to clear goods coming into the UK
[21:53] from the EU, you still have to have
[21:55] those three documents. So, you'd have an
[21:57] import declaration, your commercial
[21:59] invoice from your supplier in the EU,
[22:02] and also your packing list. Okay? So
[22:05] just beware be aware of the
[22:07] documentation requirements and if
[22:10] there's any special import or export
[22:12] controls which shouldn't be in your
[22:14] sector um capitalize on all those lovely
[22:19] um special procedures you know that
[22:20] inward processing one that I mentioned
[22:22] earlier um if you think it can help
[22:25] alleviate that that cash flow burden or
[22:28] even that cost if you're subsequently
[22:30] exporting finished goods then why
[22:32] wouldn't you get authorization for it.
[22:35] It's a cost saving. And then I think you
[22:38] know we need to start framing and it's
[22:41] really hard in a sector where margins
[22:43] have been um you know really stretched
[22:45] but I think we have to
[22:48] frame the argument away from cost and
[22:51] talk about value. We have to reiterate
[22:54] the value of UK manufactured goods. we
[22:57] have to um position ourselves as being
[23:00] on top of the whole sustainability
[23:02] agenda which I appreciate is a is a
[23:05] whole raft of work on its own but that's
[23:07] the direction of travel and I think
[23:10] those of us who are reluctant to get on
[23:12] board with that are going to lose out
[23:15] long term we're just not going to be
[23:17] able to to to trade you know and I'm
[23:20] mindful that the textile sector with um
[23:23] the majority made up of UK micro
[23:25] businesses so you know, under 10
[23:28] employees. We make up really, really
[23:31] important small cogs in large supply
[23:34] chains, but it's those larger companies
[23:38] that are being forced by by regulation
[23:41] to um change their practices. And if
[23:45] those smaller companies in their supply
[23:47] chain can't keep up, they will be
[23:49] dropped. So sustainability is something
[23:51] that concerns me personally for clients
[23:54] across all of the sectors that we deal
[23:56] with because it is coming. It's very
[23:58] real and it will impact I thinkmemes far
[24:02] more than it will the larger corporates
[24:04] who have access to more resource more
[24:07] funds more reserves to get ready for
[24:09] this and it isn't such a burden on their
[24:11] capacity and on their funds.
[24:14] So again, via onetoone, we can we can
[24:17] cover um all of this in more detail if
[24:20] at all important. Um you know, I
[24:23] referred earlier to these trade
[24:25] agreements that the UK has um got around
[24:28] the world. So I've listed them here. Um,
[24:32] this doesn't include the trade
[24:34] agreements that th those unilateral
[24:36] trade agreements that we have as part of
[24:40] the UK's GSP system or we call it
[24:42] generalized system of preference system.
[24:44] That's those almost 70 countries that we
[24:47] say we know you're developing. We want
[24:49] to help you boost your exports.
[24:51] Therefore, we'll make you competitive in
[24:53] our domestic market by um eliminating
[24:56] the import duty. So it makes their
[24:58] products cheaper here in the UK and they
[25:00] can compete with other compete
[25:02] effectively with other international
[25:03] products or domestically manufactured
[25:06] products. So that's outside of this
[25:08] slide here, but these are the ones that
[25:10] that the UK government has um kind of
[25:13] signed um post Brexit. So they're in
[25:16] various different states. Full
[25:17] ratification, meaning it's all been
[25:19] signed and all sealed. Some of them are
[25:21] provisional application, meaning they
[25:23] haven't been signed, but they're still
[25:24] in force. So, um, if you were to look,
[25:28] if I was to show you the UK trade
[25:30] tariff, you'd see that for these
[25:32] countries, typically for your goods,
[25:34] they'd be zero rated in terms of import
[25:37] duty. Um, and then there's a whole host
[25:39] of them that are being um in the process
[25:41] of being negotiated at the moment and
[25:43] the government's going out to
[25:45] consultation with businesses and other
[25:47] government bodies on um, signing up
[25:49] other ones. That's trade agreement
[25:51] consultations. But it's really important
[25:53] that we understand how trade agreements
[25:55] work. So we've been so used to to
[25:58] trading with the EU and it's all been
[26:00] free circulation of goods. If
[26:01] something's imported into the UK, it can
[26:04] be circulated throughout the other 27
[26:06] member states without any customs
[26:08] controls, any border controls, any duty,
[26:11] any VA that and so on. Very different
[26:14] with a trade agreement. So a trade
[26:16] agreement is typically typically
[26:18] bilateral. So both sides sign up to um
[26:22] the the same terms if you like. If you
[26:25] look at the UK and EU trade agreement,
[26:28] we've got this situation at the moment
[26:30] whereby it's now a preferential trade
[26:32] agreement which means that the duty
[26:35] that's charged on import is all
[26:37] determined by the origin of the goods.
[26:39] And this is where it gets tricky with
[26:41] textiles because we import from all all
[26:43] over the world. And unless we're doing
[26:46] enough processing of all those raw
[26:48] materials here in the UK, then we don't
[26:51] do enough to be able to say these goods
[26:53] are UK origin goods now. So they're
[26:55] maintained, say they're Chinese origin.
[26:58] So when they're exported to the EU, if
[27:00] they're if we haven't done enough to say
[27:02] now they're UK origin goods and there's
[27:05] a lot of um terms and and and so on that
[27:08] that determine what makes a UK origin
[27:11] goods and we can go through that. um
[27:13] then they're exported to the EU and they
[27:15] will face third country duty because
[27:17] they haven't changed their origin from
[27:19] Chinese through their their process of
[27:22] passing through the the UK. Now there
[27:24] are certain things that you can do if
[27:26] you're not doing sufficient processing
[27:28] in the UK to to say you're bringing in
[27:30] fabric from China, you're manufacturing
[27:32] a garment in the UK instantly pretty
[27:35] much that garment would be of UK origin
[27:37] and would enter into the EU duty-free.
[27:41] However, if you're just basically
[27:44] bringing in goods from um if you're
[27:47] bringing in goods from Hold on just one
[27:49] second. I do apologize.
[27:52] Bear with me one second.
[28:13] You can never prepare for all
[28:15] eventualities on calls like this. I do
[28:17] apologize. Um there are things that you
[28:20] can do. So if you were just simply
[28:21] bringing in goods from um
[28:25] China and you were just maybe unpacking
[28:28] them and repackaging and packaging them
[28:30] and sending them off to the EU. there
[28:32] there is the notion of what's called a
[28:34] customs warehouse where technically you
[28:36] bring the goods into that customs
[28:38] warehouse and they don't they're not
[28:40] cleared for free circulation in the UK
[28:42] so that duty and VAT isn't payable which
[28:45] means that they can be subsequently
[28:46] exported to the EU without um that you
[28:50] you you avoid that double duty scenario
[28:54] so the EU customer will still pay the
[28:56] import duty because the goods have come
[28:58] from China but then you haven't got that
[29:01] double duty scenario It's quite a
[29:03] complex system to to talk through on a
[29:05] call like this. I don't want to go into
[29:06] too much detail, but if you just think
[29:08] about the with the EU trade agreement
[29:11] now and any trade agreement that the UK
[29:13] has around the world, the duty is
[29:16] determined by the origin of the goods.
[29:19] Okay? So, I don't want to confuse
[29:21] matters too much more by going into too
[29:23] much detail on that. Um, but I did want
[29:25] to talk about building resilience into
[29:27] supply chains into glo global supply
[29:29] chains particularly. So um Gartner has
[29:32] this really good and when we're working
[29:34] with clients we're talking about um
[29:36] resilience and supply chains I love to
[29:39] use this um this model because it makes
[29:42] sure that clients have considered all of
[29:45] the important aspects when they're
[29:47] thinking about resilience in their
[29:49] supply chain. So the first one starts
[29:52] with risk appetite and risk appetites
[29:54] are unique to to each company. you know,
[29:56] different companies will be able to
[29:58] absorb different levels of risk, but it
[30:01] can be massively impacted or influenced
[30:03] by your market position and your
[30:05] profitability and also the product and
[30:06] service that you're offering. Um, or
[30:09] maybe the the certain competitive
[30:11] situation that you're in. And I just
[30:13] think assessing the risk that is in your
[30:17] supply chain can help you prioritize
[30:19] changes that you might need to make. So,
[30:21] you know, can you continue sourcing from
[30:24] a supplier who is providing no
[30:26] traceability on their goods, you know,
[30:29] back to the source of their goods when
[30:31] you're faced with increased regulatory
[30:34] burden in the UK and in the EU, you
[30:36] know, is is that feasible? So, that that
[30:39] represents a risk really still
[30:41] continuing to source from that that
[30:42] manufacturer, that supplier. Um, but
[30:45] remember as well that you can be subject
[30:47] to somebody else's risk analysis. So
[30:50] somebody um you know one of your
[30:52] customers could be conducting the same
[30:55] um exercise and flag you as a risk
[30:59] because perhaps you can't provide the
[31:01] full traceability on the goods. So you
[31:03] have to think about it from a from a
[31:05] kind of um you're a supplier and also
[31:09] from your supplers's perspective.
[31:12] And then I think critical partners is
[31:13] another really good one to consider as
[31:15] well. So do you have critical partners
[31:18] in your supply chain? you know, are you
[31:20] overly dependent on one or two
[31:24] suppliers? Um, and if they're weakened
[31:26] by adverse trading conditions, do they
[31:30] have ability to diversify? Can can they
[31:33] build resilience into their supply
[31:34] chain? And I think if you understand the
[31:38] kind of resilience levels of your
[31:40] critical partners then that helps make a
[31:43] decision as to whether you reduce
[31:46] dependency on them by sourcing um from
[31:49] another supplier as well split
[31:51] technically balancing that risk or do
[31:53] you look entirely for different um
[31:56] capable partners. But thinking about you
[31:59] know where the balance of risk is um
[32:01] amongst critical partners is important.
[32:04] Then thinking about what is it that
[32:05] you're actually protecting. You know,
[32:06] when you're making a decision, first
[32:08] determine what you're trying to protect.
[32:10] Is it a product line? Is it a a
[32:12] government contract? Is it market
[32:14] access? What is it? What's critical to
[32:17] your business? And then once you
[32:20] consider what you're trying to protect,
[32:22] you can you can think about sole
[32:24] sourcing risks, increased labor costs,
[32:27] tariffs, lead times, all those
[32:29] regulatory burdens as well. And then the
[32:32] answer to all of those questions gives
[32:34] you the notion of how much resilience
[32:36] and diversification
[32:38] you really need to build into your to
[32:40] your supply network.
[32:42] But then there's going to be trade-off
[32:44] decisions as well. So, you know, it's
[32:46] less it's often less expensive and time
[32:50] consuming to establish resilience right
[32:52] at the very beginning when you're when
[32:54] you're setting up a new product or a new
[32:57] or you're going into a new market. for
[32:58] example, diversifying an existing
[33:01] network is much harder to execute. Um,
[33:04] and it it can it can take up a
[33:06] significant amount of time. So,
[33:08] sometimes you might have to think, well,
[33:10] actually, you know what? I'm just going
[33:11] to leave things the way they are at the
[33:12] minute because the balance is I don't
[33:15] have time to invest in it and the risk
[33:17] isn't as great. Um, but then there might
[33:20] be other occasions where you're
[33:22] thinking, well, actually, I really do
[33:23] need to pursue this diversification for
[33:25] this new product line or something
[33:27] because the risk is too great. And then
[33:29] you have to think about who's going to
[33:30] pay for it. So, if you're starting to
[33:32] change suppliers, but that might have an
[33:34] impact on cost. It might have an impact
[33:36] on um, you know, not just the cost of
[33:38] goods, but the the cost of transport and
[33:41] duties and everything wrapped into it.
[33:43] Who's going to pay for you building more
[33:45] resilience into your supply chain? you
[33:47] know, can you absorb the cost yourself?
[33:50] Can you share them with upstream
[33:52] suppliers? Can you raise prices for
[33:54] customers? But also always keep in mind
[33:56] the fact that the cost of um not
[34:00] investing in resilience can be massive.
[34:03] Just like I said before with China, when
[34:05] COVID happened, all of our supply chains
[34:07] kind of like, you know, just fell apart.
[34:10] Um so the cost was was massive of not
[34:12] having more resilience in our supply
[34:14] chain. And then think about those
[34:17] national or trading block policies or
[34:19] incentives. Now, there's not an awful
[34:21] lot coming from UK government at the
[34:22] moment, but what I'm referring to there
[34:24] is that US lawmakers are considering
[34:27] investments of tens of billions of
[34:29] dollars in America's semiconductor
[34:31] industry over the next 5 to 10 years
[34:33] because they want to bring back
[34:34] semiconductor manufacturing to the US to
[34:38] reduce resilience on China
[34:40] predominantly. Um, and China's been
[34:43] investing in manufacturing clusters and
[34:45] automation and digital technology for
[34:47] for years. So, there's there's got to be
[34:49] a government directive to boost a
[34:51] certain sector and to reshore activity.
[34:54] Not seeing an awful lot um coming from
[34:56] the UK government as of yet, but I think
[34:59] there's still just so wrapped up in the
[35:01] whole aftermath of Brexit that, you
[35:03] know, nobody's really seeing things
[35:05] straight. Um,
[35:08] so yeah, I don't want to go into too
[35:10] much more detail on that. It's all about
[35:12] thinking, you know, if one supplier fell
[35:14] over tomorrow, do I have an alternative?
[35:17] And also thinking about the regulatory
[35:20] direction of travel, you know, am I
[35:22] going to be forced to switch suppliers
[35:24] at some point because they're not going
[35:26] to be compliant and as such they're not
[35:28] going to help me remain compliant.
[35:32] Um, accessing overseas labor and skills.
[35:34] Again, we can talk about this offline,
[35:36] but I think um so many companies are not
[35:39] taking advantage of the um what we call
[35:42] the sponsorship um sponsoring
[35:46] immigration now. So, you know, we lost a
[35:49] lot of very good um
[35:52] talent when we left the EU. There was an
[35:54] awful lot of very skilled people went
[35:56] home um and an awful lot of um
[36:00] lowerkilled labor, which is equally as
[36:02] important to our economy. um they went
[36:05] home too. So you know some sectors have
[36:07] got no succession planning. It it's all
[36:09] a little bit of a mess. But there is um
[36:12] the sponsorship scheme for um bringing
[36:16] individuals in from overseas. And I
[36:18] think sometimes because there's a cost
[36:19] associated with it some companies think
[36:21] it's just you know beyond me. It's it's
[36:24] actually not. you know, to be able to
[36:27] get a license to bring in um what we
[36:31] call uh workers or temporary workers. Um
[36:35] a company can be authorized or or have
[36:39] that sponsorship label for a £1,500
[36:42] investment and that is renewed every
[36:44] four years. And then there's a small fee
[36:48] um when you actually bring that
[36:50] individual into the UK. So um they have
[36:54] to be given what we called a a
[36:55] certificate of sponsorship and there's a
[36:57] small fee attached to that. But I think
[37:00] it's worth exploring. It's really worth
[37:02] exploring when we have this talent and
[37:05] labor shortage here in the UK. We you
[37:07] know we can't the UK apprenticeship
[37:10] schemes are starting to build traction
[37:12] but not to the level that we need. So
[37:14] why aren't we looking back to overseas?
[37:17] And yes, there's a charge attached to it
[37:18] whereas before there wouldn't have been.
[37:20] But again, balancing that up. Um, it may
[37:23] well be worth looking into in more
[37:25] detail.
[37:26] Um, currency risk exposure. Not going to
[37:29] talk too much about this because I'm
[37:30] very mindful of time. Um, but again, I
[37:33] mentioned earlier that um, you know,
[37:35] exporters um, make hay while the sun
[37:38] shines when we have a weak pound, but
[37:39] for importers, it can be really, really
[37:41] hard. And not forgetting that a lot of
[37:43] our exporters are importers as well. it
[37:45] kind of balances out really. Um there
[37:48] are a a couple of hedge um hedge funding
[37:53] um kind of options that I want to
[37:56] discuss with you. We've got forward
[37:57] contracts and and market orders. And the
[37:59] difference between those two is
[38:01] basically forward contracts is you agree
[38:04] to um purchase currency at a certain um
[38:08] rate and that rate is usually maintained
[38:10] for two years. It's like a fixed rate um
[38:13] interest on your mortgage. Um so you can
[38:16] plan effectively, you know, if you know
[38:18] um when you're going to be bringing in
[38:20] supplies, you you know that you've got
[38:22] that fixed rate. Now, that can work to
[38:24] your advantage or not your advantage. So
[38:26] when it's more favorable conditions,
[38:28] you're still stuck at that kind of like
[38:30] low exchange rate, but also it protects
[38:32] you against if the exchange rate goes in
[38:34] the other way.
[38:36] Market orders um are kind of like
[38:39] slightly different.
[38:41] They don't um dictate when in the future
[38:44] you actually buy that currency, but you
[38:47] can determine kind of like a a banding
[38:51] for the currency. So, um you know,
[38:53] you'll only ever have this low exchange
[38:55] rate and you'll only ever have that high
[38:57] exchange rate. So it's just again it's
[39:00] just a level of certainty and it's just
[39:01] a level of protecting yourself against a
[39:03] volatile um currency market. Um and then
[39:07] I think I mentioned earlier you know
[39:08] operate through other um other accounts
[39:11] you know a lot of the country a lot of
[39:14] the world still trade in US dollars. So
[39:16] a US dollar account might be good so
[39:18] that you can determine when you um
[39:22] exchange that that money you know when
[39:24] the exchange rate is looking good and
[39:25] you know it can differ quite
[39:27] significantly um day by day have a euro
[39:30] account for example um but exchange rate
[39:34] fluctuation and protecting against
[39:35] currency risk are always things that I
[39:37] say speak to a specialist if you don't
[39:39] have anybody in your network then um
[39:42] drop me a line and I can make a good few
[39:44] recommendations. I've worked with a
[39:46] number of them now over the years. Um,
[39:49] adapting to changing customer buying
[39:51] preferences. This is a whole big um big
[39:55] topic to be honest, but we we are seeing
[39:57] that outside of cost overwhelmingly
[39:59] sustainability is what's driving
[40:01] customer buying preferences. Um, and
[40:03] again, you know, I I keep citing that
[40:05] Gen Y and that Gen Z demographic, but
[40:08] they are the our consumers of today and
[40:10] tomorrow. You know, they've got a lot of
[40:12] working years ahead of them. So, they've
[40:14] got to have that disposable income. And
[40:16] we need to make sure that we're aligning
[40:18] our brands with their values. And I
[40:20] think sometimes we get so head up on
[40:23] thinking about sustainability as being
[40:26] just environment. Sustainability isn't.
[40:28] It's got that social aspect as well. And
[40:30] remembering with textiles, there might
[40:32] be certain things that without a big
[40:34] macro shift or a big government push,
[40:36] you can't influence. But what can you do
[40:39] on the social side of things that
[40:41] promotes your company as taking
[40:44] seriously your ESG or your environmental
[40:46] or social governance? Um you know so
[40:50] there's things like you know um the
[40:52] social aspects, health and safety, fair
[40:55] salaries, workplace diversity and
[40:57] inclusion, employee well-being,
[40:59] community engagement. All of those
[41:01] things tie into your position as being a
[41:04] sustainable company. So, it doesn't have
[41:06] to be all about the environment. Um,
[41:10] you know, if you think about textiles,
[41:12] it's known to be one of the largest
[41:14] sectors contributing to those global
[41:16] carbon emissions. Um, and that's, you
[41:19] know, some of it we can barely get away
[41:21] from. You know, we've got lengthy supply
[41:23] chains, you've got energyintensive
[41:25] production methods. Um but but this
[41:29] sector does um contribute to eight
[41:33] between 8 and 10% of global carbon
[41:35] emissions. It has a a kind of negative
[41:38] um negative what's the word I'm looking
[41:41] for? Um reputation in that respect. So
[41:45] anything that you can do that you know
[41:48] that's within your power um to address
[41:51] that is always good. And that's where we
[41:52] we talk about materiality assessments
[41:55] and we can talk about that in onetoone
[41:57] but it's basically engaging your
[41:58] customers, your employees, everybody
[42:01] that sits within your community to talk
[42:03] about what's important to them. What's
[42:06] important to them from an environmental
[42:07] and social perspective and governance
[42:10] perspective and then you look at what
[42:13] you can feasibly do as a business to
[42:16] address some of these things that are
[42:17] important to your stakeholders. And I've
[42:20] put the UN sustainable um development
[42:22] goals there because they're a fantastic
[42:24] framework of 17 goals that um you know
[42:28] even if you just pick two or three of
[42:30] those to focus on as a business, you're
[42:33] making a change. And you think about the
[42:35] whole you know the the level ofmemes
[42:38] that make up the the global economy. We
[42:41] are overwhelmingly the backbone of the
[42:43] global economy, not just the UK economy.
[42:46] If we all made just those little
[42:47] changes, you know, the the impact would
[42:50] be absolutely massive and the important
[42:53] thing is it's important to your
[42:54] customers, it's important to your
[42:56] community. But this is an a whole other
[42:58] section. We're doing a a webinar on it
[43:00] um I think two weeks from today as well
[43:02] all about that sustainability piece. But
[43:04] we can talk about it in a oneto one as
[43:06] well after this. But it's it's a way of
[43:09] remaining relevant to your your
[43:12] customers that are prioritizing
[43:14] sustainability even though you can't
[43:16] impact much of the environmental piece
[43:18] right now because that that takes a big
[43:21] industry shift. It takes a big
[43:22] government shift across the board and
[43:24] you can't always influence that. Um I
[43:28] just want to finish on talking about the
[43:29] the link legislation because at the
[43:31] moment sustainability has been a bit
[43:33] carrot and stick a lot of carrot.
[43:36] There's a lot of stick coming down the
[43:37] line. Now, um, one of the most
[43:40] controversial pieces of legislation
[43:42] that's come before UK Parliament last
[43:44] year was about the retained EU law bill,
[43:49] which is kind of called what the the
[43:51] Tories called the Brexit Freedoms Bill.
[43:54] Um, but that was set to basically revoke
[43:58] a lot of um EU regulation. So it it's
[44:02] that you know freeing ourselves from the
[44:04] shackles of the EU as as it's been
[44:06] described. Um we've been told that
[44:09] actually um that the environmental
[44:13] regulation would stay because it's
[44:15] stringent and it's important. It has a
[44:17] global impact. Um we're now seeing as of
[44:20] an amendment that was made to the bill
[44:22] last week that we're starting to deviate
[44:26] a little bit. Now what impact that has
[44:28] on sectors across the UK where you know
[44:31] if the UK seemed to have deviated too
[44:33] far from EU regulation does that put a
[44:35] barrier another barrier in place in
[44:38] terms of trading with the EU? We'll have
[44:40] to see it's coming out in the wash. One
[44:42] one part of the regulation that I saw um
[44:45] is going to be removed as the National
[44:47] Air Pollution Control Plan, which
[44:49] obviously was a big piece of regulation
[44:51] that the EU pushed to get through and
[44:53] now we're basically saying we're going
[44:54] to either simplify it or move away from
[44:56] it. Big issue there. Um but there's
[44:59] other things coming up. So, um ESG and
[45:03] sustainability reporting. So over the
[45:06] last um oh probably three to five years
[45:09] we've seen a big impact um on corporates
[45:13] of the amount of um disclosure and
[45:15] reporting that they've had to do around
[45:18] their environmental impact. Um, so we've
[45:21] seen a huge push in financial services.
[45:24] Um, and now, you know, banks and
[45:28] insurance companies are having to comply
[45:30] with a raft of regulation that enables
[45:33] consumers to understand fully the
[45:37] sustainability related features of an
[45:39] investment product or a banking product
[45:41] for example. We're going to see that
[45:43] across different sectors as well. Um and
[45:45] we're going to see it I think personally
[45:49] filter down tomemes whether they're
[45:50] impacted by the supply chain. So because
[45:54] one of your buyers has to report then
[45:57] you have to report because you have to
[45:59] provide data to feed into their report.
[46:02] But I think also at a certain point down
[46:05] the line it's going to be well
[46:06] corporates report on this why
[46:07] can'tmemes. So I think it's a case of
[46:10] what do you need to be doing now? And I
[46:12] think it's a case of identifying the
[46:14] data that you should be maintaining and
[46:16] start maintaining it now for the point
[46:18] at which it becomes pertinent from
[46:20] either a buyer or a supplier um and or
[46:24] when the regulation filters down to
[46:27] theme level. Um we've also seen the EU
[46:31] strategy for sustainable and circular
[46:33] textiles. So um a rather lofty ambition
[46:37] to make textiles more durable,
[46:39] repairable, reusable and recyclable and
[46:41] to tackle that fast fashion and textile
[46:44] waste. I was shocked actually to read
[46:45] that that textiles in terms of textiles
[46:48] is only 1% recycled which really shocked
[46:51] me actually. Um but this EU strategy is
[46:54] aiming to address that. Now it's already
[46:56] started to drive the agenda in the EU.
[46:58] So the question is what's it going to do
[47:00] for UK companies that are trading with
[47:02] the EU? To what level are we going to
[47:04] have to um comply and again we can
[47:06] discuss that in more detail separately.
[47:08] Um EU digital product passports they're
[47:11] coming. Um so they're designed that
[47:14] transparency piece that I talked about
[47:16] before. These digital passports or
[47:18] digital product passports are aimed to
[47:20] provide that transparency to so to kind
[47:23] of um share that product information
[47:25] across the entire value chain. So data
[47:28] on raw material extraction, production,
[47:30] recycling and so on. In the EU as the
[47:33] first large regulator
[47:35] um others will follow suit. So I think
[47:38] it's what can you do from your
[47:40] perspective today? It comes down to that
[47:41] data again identify the gaps in the
[47:44] data. So in your supply chain you know
[47:46] do you have that full traceability? If
[47:49] you don't where are the gaps and how do
[47:51] you overcome those gaps? So start
[47:53] collecting that missing data um and
[47:56] start becoming familiar with those kind
[47:58] of um ESG reports and life cycle
[48:01] assessments and so on. And again we've
[48:02] got a ton of information we can share
[48:04] with you around that. Um extended
[48:07] producer responsibility. That's a big
[48:10] one affecting lots of sectors, not just
[48:12] textiles, but it's the notion that the
[48:14] producer and that is you guys as the
[48:17] exporter. For example, it impacts our
[48:19] our exports predominantly into the EU at
[48:22] the moment because they're leading with
[48:23] this, but it will replicate around the
[48:25] world. It puts the burden of
[48:27] responsibility back on the exporter to
[48:29] pay for what is effectively the
[48:32] recycling of the packaging at this stage
[48:35] um of the goods that they export. um
[48:38] very helpfully the EU, no two member
[48:40] states are implementing the the
[48:42] legislation in the same way. So there's
[48:44] different thresholds by which it it will
[48:46] apply to you and and so on. Again, we've
[48:49] got um reports that we can share with
[48:51] you, but that's one to think about where
[48:52] it comes to packaging. If you are um
[48:57] you know exporting goods to the EU and
[48:59] you're using certain types of packaging,
[49:02] then you will have to pay a contribution
[49:04] towards the recycling of that packaging.
[49:07] moving forward and actually France,
[49:08] Germany and Spain actually France and
[49:12] Spain sorry there's no thresholds it's
[49:14] just if you're exporting you have to pay
[49:16] this this contribution so that really
[49:19] needs to be that the whole idea is that
[49:21] it's it's trying to change company's
[49:23] attitudes towards packaging you know
[49:25] they'd rather resource alternative or um
[49:28] research alternative packaging materials
[49:32] um than than pay for the other one than
[49:34] than pay this contribution
[49:36] Um the other one I'll point out I'm
[49:38] really really conscious of time is the
[49:40] UK chemical strategy is going to be um
[49:43] announced. It should have been now but
[49:44] it's been postponed to the end of the
[49:46] year. Um it'll set out how we're going
[49:49] to regulate chemicals going forward now
[49:51] that we're outside of the EU. So for me
[49:53] I was thinking well how is that going to
[49:55] impact those um chemicals that are used
[49:59] for fabric finishes like crease
[50:01] resistant anti-static easy care and so
[50:03] on. and what impact might it have on
[50:05] dying as well. Um so so lots going on.
[50:10] Um again we'll share these slides with
[50:12] you together with the recom the the
[50:14] recording
[50:16] and then just moving on to the the um
[50:19] support. I'd like to just finish this
[50:21] slide by just saying look just get in
[50:23] touch and whatever your requirement is
[50:25] whether it be your um lack of knowledge
[50:28] or you've got um a particular challenge
[50:31] or a particular ambition then all of
[50:34] this support that we're funded to
[50:36] provide on behalf of the East Midlands
[50:38] Growth Hub. It's all clientled. So we've
[50:42] got this framework. We can do um
[50:45] sustainable trade trade planning. We can
[50:48] do trade compliance reviews, we can do
[50:51] um you know our global manager program,
[50:53] but ultimately it's driven by you guys.
[50:55] It's driven by what is most important to
[50:56] you. So if you've got a challenge or an
[50:58] ambition linked to international trade,
[51:01] then just get in touch and we can
[51:02] support you with that. And as you can
[51:04] see, for some clients, they've received
[51:06] up to 30 hours of um support from
[51:08] ourselves. We're very very hands-on. Um
[51:12] we don't just tell you to do it and go
[51:14] away. will do it side by side with you
[51:16] or do it for you and explain how we did
[51:19] it. It's all about that knowledge
[51:21] transfer, making sure that you become
[51:23] more self-sufficient with global trade
[51:25] moving forward. How you take advantage
[51:27] of this? Um for the free support, you've
[51:31] got to be in Lincolnshire, Leicester,
[51:33] Nottinger, Darbasher. Um and you've got
[51:38] um you can sign up to oneto ons um via
[51:41] um our website or via eventbrite. You
[51:44] can just drop us a line to
[51:45] internationalization@globaltrade.com
[51:47] or you can give us a call. Um but you
[51:50] might not be I'm not sure where all of
[51:53] you are joining from today. So if you're
[51:54] outside of those um areas, don't worry.
[51:57] Um we don't charge for picking up the
[52:00] phone and having a chat and signposting
[52:02] and pointing in the best direction. So,
[52:05] um, you can just get in touch with us at
[52:07] contact global trade deck.com or you can
[52:10] book um a a one-to-one discussion by
[52:13] Zoom. So, if you're not in the East
[52:15] Midlands, don't stress about it. Um,
[52:18] we're still here to support you. We know
[52:19] it's a a bit of a a rubbish time at the
[52:22] moment. And then my details are here,
[52:25] but I'm going to share these slides with
[52:26] you anyway. So um what I'll do is I'll
[52:29] stop sharing.