UK – New Zealand free trade agreement: opportunities for British companies

How is the UK moving in the current international scenario?

The diplomatic strategies imposed by the Brexit have pushed the government to look for new ways to grow the country’s economy.

One of these is through the signing of bilateral trade agreements with other countries.

The latest is the one sealed on 28 February in the presence of New Zealand Minister Damien O’Connor, after just under two years of work.

The UK and New Zealand are laying the foundations for future relations through strategic interventions in specific areas.

What are the main advantages for British companies? Which sectors will benefit most once the agreement is in place?

Let’s find out in our analysis.

An overview of the agreement between UK and New Zealand

After reaching agreement in principle last October, the authorities finalised the deal at the end of last month.

With trade worth £2.3 billion in 2020, future forecasts predict a potential 60% increase in trade between the two nations.

Official sources report that more than 6,700 UK companies exported to New Zealand in 2020, and the number could grow as tariff and non-tariff measures are reduced.

According to government estimates, the measures are expected to positively impact over 5,000 SMEs with more than 200,000 employees that export goods to New Zealand.

Manufacturing companies, especially those in the West Midlands and North East, are expected to benefit most from the FTA. The service sector will also find new business opportunities.

Companies active in the financial, legal and professional consultancy sectors could increase their turnover, further strengthening the UK’s leadership in this field.

Furthermore, the signing of the agreement brings the UK closer to a strategic economic area such as the Comprehensive and Progressive Agreement for Trans-Pacifc Partnership (CPTPP).

With over half a billion people and a GDP of £8.4 trillion in 2020, the agreement brings together some of the world’s fastest growing countries in recent years.

Strengthening its presence in New Zealand could allow British companies to tap into new opportunities in a wider landscape.

But which sectors of the UK economy are expected to benefit most?

Agri-food, automotive, clothing and more: opportunities for growth

There are many British excellences that could get more space in New Zealand.

Here is a list of them:

• Automotive products account for around 26% of UK exports to NZ, and companies could increase their gross value added by more than £45 million through reduced tariffs on components such as engines and vehicle categories like buses, trucks and motorhomes.
• Agri-food with its flagship products – chocolate, biscuits, gin and more – will benefit from easier rules of origin, allowing producers to enjoy 0% tariffs on goods, even if the origin of the ingredients is not entirely British. The consequence? More flexible management of their supply chain and lower costs to export. In addition, the proximity to CPTPP countries translates into an excellent business opportunity, for example for beef and lamb producers, whose consumption is growing in Asian countries.
• UK-made clothing will also benefit from zero duty on many products such as leather shoes and bags, as well as jackets and coats.
• The same is true for machinery, chemicals and other manufactured goods, which will benefit from simplified import-export procedures. The measures will support in particular SMEs, which will receive training in international trade. Revised rules of origin will allow companies to manage their supply chain more easily also for these industries.

Thus, while the authorities’ interventions aim to support the development of companies, the latter also need to change the way they act.

But how?

Studying the market to exploit its potential

We have looked at the measures from which companies can benefit; let’s now see how to lay the foundations for tomorrow’s growth.

Regardless of sector, companies are called upon to build new valuable relationships.

A free trade agreement alone cannot meet this need, which is why market research is essential.

In the case of the deal with New Zealand, companies not yet present in the region will be looking for new customers, suppliers or distributors. Similarly, those already operating here may want to expand their business, even outside the country.

In addition, the new rules of origin contained in the agreement will give producers greater freedom in managing their supply relationships, while at the same time enjoying zero duties on products.

For this reason, companies looking to diversify their supply chain and export to New Zealand will also need to explore new markets to find alternative suppliers for their business.

But how to do this effectively and affordably?

Profiling foreign markets: a winning choice

The immediate answer is business trips and participation in international trade fairs.

This is an expensive alternative that often does not deliver the desired results; in the same way, buying market analysis from business information providers is not very effective.

These are expensive consultancies with long lead times.

But there are effective solutions that combine Artificial Intelligence with global business databases, such as the Explore platform we have developed.

It allows you to automatically profile the companies you are looking for, taking full advantage of a free trade agreement such as the one between the UK and New Zealand. In this way, even SMEs can seize the opportunities offered by the current international trade scenario.