Pivotal moment for UK-Asia trade

Some 30,000 delegates from nearly 100 countries are participating to one of the world’s biggest business events in Liverpool: the International Festival for Business (13 June to 1^st July).

Though the festival is truly global, some of the biggest delegations are from Asia. A reported 45 companies come from Bangladesh alone, along with senior executives from India and Japan: a total of 15 Chinese cities have sent representatives too. The warm welcome by the UK hosts is a further sign of the appetite on both sides to build on mutual trade and investment ties.

It is easy to understand why many British exporters are keen. While economic growth in the UK’s traditional trading partners such as the US and Europe remains relatively modest, Asia’s share of global exports is set to rise to 46 per cent by 2050 from about 33 per cent today, according to HSBC forecasts. What’s more, Asia has reached a point in its economic transformation which presents opportunities in areas of UK expertise.

With urbanisation set to continue, Asia will be home to two-thirds of the global middle class by 2030, according to the Organisation for Economic Co-operation and Development. British producers of everything from food to handbags are hoping that the strength of their brands, coupled with a reputation for quality, can help them appeal to this growing consumer base.

At the same time, the growing sophistication of many Asian economies has the potential to boost demand for services. Trade in services has, in fact, been a bright spot for global trade over recent years despite subdued conditions overall. The UK is a world leader in sectors such as design and architecture, law and accountancy, gaming and music. Technology has made it easier than ever for these services to cross borders and many British businesses hope to capitalise on this.

But the relationship has the potential to grow in both directions. The UK is already a major purchaser of manufactured goods from Asia. China is set to overtake Germany to become the biggest single source of UK goods imports by 2030, according to the HSBC Global Connections Trade Forecast. Imports to the UK from Vietnam, Bangladesh and India could also grow at a rate of about 8 per cent each year in the decade to 2030, the report says.

As well as exporting to the UK, Asian organisations are investing in the country. They have bought stakes in sectors ranging from consumer brands and restaurant chains to energy. In 2015, more than half of China’s international mergers and acquisitions targeted Europe (including the UK), compared with just one-tenth in 2010.

Working in partnership with UK firms may present particular opportunities for Asian companies aiming to move into higher-value products. The UK’s strengths in science and technology, for example, support innovative businesses in fast-growing sectors such as software, technology and materials.

In the short term, tough global trading conditions could affect the development of UK-Asia links. Equally, businesses from many other nations are ready to compete with UK firms for their share of growing Asian markets. On some measures, they have made a quicker start: the value of German goods exported to China is about three times higher than the UK’s, for example.

Whatever the challenges, the International Festival for Business shows that many companies in Asia and the UK recognise the potential benefits of closer ties. For banks such as HSBC, it is an opportunity to build on a long history of connecting customers to opportunities around the world.