Three ways to position the UK as an innovative trade partner

Frankie Arnull

By Thomas Sweetman, Frankie Arnull

In the UK, we spend more on importing goods and services than we bring in through sales of our export – in other words, we have a trade deficit. In 2022, the UK’s trade deficit was £87bn. A deficit of this size leaves us vulnerable to external market volatility in an uncertain world.

To redress this balance, the Department for International Trade (now the Department for Business and Trade, or DBT) set a target for annual exports of £1tn. Reaching that figure would give us a healthy surplus if imports were to remain relatively stable. And progression towards the goal would create more of an equilibrium that would be beneficial to the UK.

To reach this target and build a more resilient economy, we need to make the UK more appealing as a global trading partner, bolstering our chances of exporting more and addressing the trade imbalance. This would bring money into the economy, create jobs, and support communities. To make it happen, we need to innovate.

Adding value through innovation

Innovation is often associated with bringing in new technology. At PA, when we talk about innovation, we mean introducing a range of new ideas that add value – which may indeed be new technology but could also be new ways of doing things or investments in people. In our recent report, The Innovation Opportunity, we identified three ways for public sector leaders to make sure they’re getting the most out of innovation:

1. Take inspiration from ‘deep need’. The key to successful innovation is making sure that what you design matches up as closely as possible to the need or problem you have identified. This means getting a thorough and unbiased understanding of the situation before designing something to solve the problem. Taking the time and care over this step helps to make sure that the innovation sticks and isn’t just a fad which won’t last the test of time.

2. Put inclusion at the very heart of innovation. Innovations are much more likely to take root successfully if you can find ways to include a broad range of backgrounds, skills, and experiences within the team. Widening participation in innovation activities is, therefore, an essential ingredient, not a ‘nice to have’. One of its many benefits is that it can help to overcome any subconscious assumptions or biases which might be affecting your understanding of the problem.

3. Get started and build from there. Too often, we are reluctant to start implementing something until we feel we have cracked the whole problem. It’s understandable, but implementing a workable, if imperfect, solution at first can start to address the issue you’ve identified. That solution then provides you with solid ground for making small, incremental improvements from there.

What this looks like in practice

So, what might innovation in trade look like? A good place to start would be maximising the assets we already have – making those incremental improvements to iterate for success. DBT has slowly been shifting the focus from establishing new Free Trade Agreements with other countries to ensuring that British businesses are adequately set up to capitalise on the ones we already have. This is a great start – but are there other partnerships that could be brokered to enable international trade?

Over the past few years, Freeports – special areas within the UK’s borders where different economic regulations apply – have been created across the country. Through Freeports, there is an opportunity for the UK Government to foster partnerships with international special economic zones and free trade zones around the world to facilitate the trade of goods from the UK to these markets. This would have the added benefit of making Freeports more attractive to investors who may seek to set up in UK Freeports to access these established trade corridors.

We also need to make the best use of the technology that is available to us – both in everyday trading operations and in analysing the data that is generated. Embracing e-borders, intelligent document processing, and AI tools for customs checks will reduce the administrative burden on businesses importing to or exporting from the UK. This would reduce idle time in the supply chain, ultimately reducing the costs of doing business with the UK.

A change in mindset

The most innovative approaches to trade will take time and require a shift in our current mindset. Government should view itself as an enabler of the economy, creating the framework to help others succeed and acknowledging that the £1trn export target is a shared aspiration which will require collaboration to achieve. It can only be delivered in conjunction with British businesses, large and small. Government will need to inspire businesses to be ambitious in their outlook, even when times are tough, to collaborate and to be ready to pivot to capitalise on new opportunities when they present themselves. We need to think about the UK’s offer to the market and why others should come to us. And we need to make sure we are including and investing in a breadth of people, providing education, and building the skills we need for long-term success.

Finally, we must not let perfect be the enemy of good. Waiting until we think we have solved the problem in its entirety is a recipe for being left behind. Let’s start innovating and figure it out from there.

For further information on PA’s approach to innovation, take a look at our report, The innovation opportunity: Achieving greater returns on UK innovation.

About the authors

Thomas Sweetman PA innovation expert
Frankie Arnull
Frankie Arnull PA public sector and strategy expert

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