15 March 2023

UK TPO: The challenges facing UK firms: trade and supply chains

Significant issues for firms working with the new TCA trading arrangements with the EU: red tape, bureaucracy, shipping/transport issues and delays, increased costs, and customs and border controls. The least significant issue, in the context of the TCA, would appear to be labour and skill issues.

• Analysis of three surveys of firms conducted by the British Chambers of Commerce reveals that the biggest challenge facing firms across 2021 and 2022 has been increased costs. Labour, skill and supply chain issues are also major concerns but ease slightly in mid-2022.
• Significant issues for firms working with the new TCA trading arrangements with the EU are those associated with red tape and bureaucracy, shipping/transport issues and delays, increased costs, and customs and border controls. The least significant issue, in the context of the TCA, would appear to be labour and skill issues.
• Specifically related to the TCA, the biggest changes over time are the rise in the significance of taxes, tariffs and duties for firms, the role of increased costs for firms, and the increased perception of a competitive disadvantage for the UK.
• There is a notable rise in negative sentiment in the North East and in Northern Ireland. Negative sentiment is the highest in public administration, and in agriculture, and is also relatively high in manufacturing. The lowest negative sentiment scores are in education and legal services.
• According to the latest survey, Brexit and COVID-19 are the principal causal factors in supply chain shortages, with the most significant shortages amongst electronic components/goods and labour.
• The most frequently cited opportunity refers generically to business expansion opportunities, but was mentioned in less than 2% of the responses.

It is now over two years since the introduction of the Trade and Cooperation Agreement (TCA) between the UK and the EU. The introduction of the TCA’s new trading arrangements has led to a range of challenges and opportunities for firms in the UK. In addition, the global economy has been beset by some further stiff challenges over the past few years, notably the Covid-19 pandemic, and, over the last year, the disruptions caused by Russia’s invasion of Ukraine to both energy markets and food security. The British Chambers of Commerce (BCC) undertakes regular surveys of its firms across a range of issues – including international trade, and the results of these are regularly published in BCC reports and press releases. The most recent BCC report, published in December 2022, evaluated the TCA two years since its inception and was largely based on the July 2022 survey.

In this Briefing Paper, we have worked with the BCC to produce a long-term perspective on the challenges facing UK firms, based on the BCC’s previous three trade-focussed surveys undertaken over 2021 and 2022. Each of these surveys asks a set of standard multiple-choice style questions as well as ‘free text’ questions where, instead of choosing from multiple-choice options, firms are asked to report directly on the challenges and opportunities they face. We apply a wide variety of text mining and natural language processing (NLP) techniques to these textual responses and then use a range of powerful machine learning techniques to analyse around 3000 sentences from the respondents’ answers across all three surveys. Machine learning is a branch of artificial intelligence that has received significant traction in recent years to help businesses draw conclusions and meaningful insights from large volumes of unstructured, raw data. This approach is used to identify which sentences are challenges and opportunities and then also to distinguish which sentences are more negative or positive i.e., to capture the intensity of these challenges and opportunities. The models work by looking for patterns in the data; they continuously learn from these patterns which informs the model’s decision on new data....

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