Bringing the Silk Roads into the 21st century, January 2017 saw the first ever train travelling between Beijing and the UK arrived in Barking, London. This re-incarnation of the Silk Roads has placed the future of international trade firmly on the radar of policy makers and business leaders.
The new direct trade link between China and the UK, and an alternate approach to international trade, present a number of opportunities for UK SMEs. Stretching from the far side of China, through central Asia and India, on to the Middle East and expanding into Europe, the Silk Roads were a series of criss-crossing trade networks. Goods from pepper to cinnamon, to furs and silk, were traded across countries and Empires. This trade brought new wealth to regions of the world and also allowed the emergence and trade of new ideas and skills as well as cultures and beliefs.
Across this famous route, the Beijing to Barking train carried over £4m worth of goods, travelling over 7,500 miles through eight countries, arriving in East London 17 days later. And as the UK braces itself to begin the negotiations to leave the EU, the prime minister has made clear her vision to make the UK a nation that wants to trade freely with everyone. However, as new trade deals are negotiated, who the UK will trade with in the future remains unclear.
In our Q4 SME Confidence Tracker, UK SMEs overwhelmingly viewed Germany (59 per cent) as the most important country to the UK’s economy within the EU. This was followed by France, although at a significantly lower preference – nine per cent. Outside of the EU, 51 per cent of businesses said the US was the most important to the UK economy, followed by China (32 per cent). Despite the vast differences in preference and ranking of market importance, the constant in this list is that SMEs, even those that have little experience exporting outside the EU, are drawn to markets that feel similar.
While these four countries, plus the UK, make up five of the top ten economies in the world, there is the risk that UK businesses are putting too many eggs in one basket when looking to export. Emerging markets such as China and India have long been touted as markets that present great opportunities for future growth. These are countries that were once at the heart of the Silk Roads, and that the UK traded with, in the past. There are also other economies that are experiencing significant long term growth e.g. Brazil, Indonesia and Russia, which also present opportunities for SMEs to export to.
In October last year, the UK recorded the highest level of exports of goods and services since records began, exporting £46.4bn. In particular, there was a strong boost in the export of goods to non-EU countries, pointing towards the wider opportunities on offer to UK businesses. After all, the future of what businesses trade is also changing. All too often, when we think of trade, it is aligned to physical goods.
As was the case thousands of years ago, the Silk Roads were not just about the trade of these goods. In the age of the internet, it is important that the UK looks to trade the ideas, skills and innovation that are created here. Some of the biggest global businesses that have emerged in recent years such as Facebook and AirBnb have been built on the trading of data, information and content.
While the debate around the merits of globalisation is set to be a theme in the years ahead, it is clear from thousands of years of history that however the world expands and grows; the flow of trade almost always reverts back to the Silk Roads. It is where future growth and opportunities for businesses are likely to come from. What the UK, and its SMEs, need to ensure, is that next time the train from Beijing arrives, it is packed full of UK manufactured goods on the way back.
Phil Tobin is managing director for trade and international at Bibby Financial Services
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