Elevating trade performance: A priority for regional leaders
Jun Du (pictured), Professor of Economics at Aston Business School, is a commissioner for the Business Commission West Midlands.
She has been supporting with engagement in the region’s business community and the creation of the final ‘Roadmap for Business Growth’ report.
Jun reflects on her role in the commission and the next steps for business growth in the Midlands in this blog.
International trade is a catalyst of economic growth and business development. For regions like the West Midlands, enhancing trade performance is essential for sustaining economic prosperity. Despite of limited influence local governments have over national trade policy, prioritising export orientation and global competitiveness remains crucial for regional leaders.
In today's fragmented economy, efficient, smooth, and resilient supply chains are critical. Being part of global value chains enhances competitiveness and provides pathways for businesses to learn, connect, and adapt to rapidly changing markets.
Diversifying market bases through international trade also mitigates risks associated with economic downturns or political upheavals in any single market, ensuring long-term stability.
International trade is a growth engine, generating employment and driving economic expansion. Regions with strong trade performance attract foreign direct investment (FDI), bringing in capital, technology, and expertise that fuel further development.
However, the UK’s trading capacity in goods has shrunk since 2020, losing significant amount of traded goods varieties, particularly affecting small businesses trading with the EU.
Small firms often export a narrow range of low-value products, making them less adaptable to shocks. Larger firms, while also affected by increased trade barriers, are better positioned to overcome these challenges, leading to increased market concentration among large exporters.
The West Midlands, a leading region for international trade, has faced slow recovery since the COVID-19 pandemic and leaving the EU Single Market.
Its main exporting sectors, Machinery and Transport Equipment, are grappling with rapid technological changes and stringent environmental regulations, creating an uncertain business environment amid fierce global competition.
The Business Commission West Midlands' Roadmap for Business Growth addresses these challenges.
While it may not offer all solutions, it poses critical questions and stimulates discussions and debates on the essential steps to stimulate growth and competitiveness. By gathering input from thought leaders, business leaders, and policymakers, it aims to build consensus and pave the way for strategic efforts to drive regional growth.
Strategies to boost regional trade performance
1 Create a vision and promote the region
Establish a long-term growth vision aligned with a tailored regional industrial strategy that reflects the unique strengths and potential of the West Midlands. Actively promote the region's capabilities to attract investment and foster growth.
2 Targeted support for SMEs
Provide targeted support to SMEs to overcome trade barriers.
Building on the efforts of the Department for Business and Trade (DBT) Midlands teams, offer accessible, high-quality, and tailored support for SMEs embarking on or returning to exporting. Collaboration among DBT Midlands, Great Birmingham Chambers of Commerce, Local Growth Hubs, and West Midlands Growth Company initiatives is crucial, along with creating a joint database for effective evaluation.
3 Infrastructure investment
Invest in transportation and logistics infrastructure to improve supply chain efficiency and reduce trade costs.
Redirect funds from the HS2 project to enhance regional connectivity, while further investment is needed to improve multimodal transport hubs, improved digital infrastructure, and better road and rail links to ports. Promote public-private partnerships for innovative infrastructure projects.
4 Market and product diversification
Encourage businesses to explore new markets beyond the EU to spread risks and reduce dependency. Government-led trade missions and market intelligence services can help identify new opportunities. Additionally, identify potential new products and services that could develop export capabilities.
5 Seize opportunities in service trade
Capitalise on growth opportunities in the service trade sector, particularly in ‘other business services’ like consulting, legal, accounting, and marketing, which have high potential in both EU and extra-EU market. Support service-oriented businesses through market research, digital infrastructure enhancement, and skills development.
6 Policy advocacy
Advocate for favourable trade policies and agreements that support regional businesses. Improving the UK-EU trade relationship is crucial to maintaining the region’s position in EU supply chains. Focus on exploring additional arrangements to the Trade and Cooperation Agreement (TCA) to protect Midlands industries from non-tariff measures and rules of origin requirements.
In conclusion, trade is an indispensable driver of economic growth and business development. For the West Midlands, implementing strategic initiatives to support SMEs, invest in infrastructure, facilitate trade, diversify markets, promote innovation, and advocate for favourable policies can significantly boost regional trade performance.
Engaging with a wide range of stakeholders, from local businesses to government bodies, is crucial to ensuring the success of these strategies and building a sustainable, competitive regional economy. By doing so, the region can enhance its competitiveness, foster business dynamism, and achieve greater economic prosperity in an increasingly interconnected world.
