It’s always tempting to view trade as a zero-sum game, focusing exclusively on exports and seeing imports as either unimportant or a drain on the economy. Many people argue that because we have a trade deficit with the EU (particularly in manufactured goods) the EU needs the UK as a trading partner more than the UK needs the EU, or even that a no deal scenario might actually boost British industry.
However, while exports are clearly vital, the ability to access cheap, reliable imports can also benefit the economy by keeping domestic prices low and giving consumers a wider choice.
One person who knows this only too well is John Hood, who is business development director at STL Heating and Energy. STL is a growing firm that supplies heating systems, including boiler installation, servicing, repair and maintenance to households across the United Kingdom. It employs 120 people, and had a turnover last year of more than £8m, and has helped an estimated 30,000 customers during its time in business.
Boilers are at the core of STL’s business – it installs just under 300 each month. To keep costs as low as possible, STL needs to pay as little as possible for each one. At the moment, most of the boilers used in the UK are imported from the EU, with even domestic manufacturers looking to the European market to determine prices. And while Brexit “hasn’t had a huge immediate impact”, many of the local merchants that STL buys from have started to raise their prices, to reflect both the post-referendum fall in sterling and the greater uncertainty about Britain’s future trade relationship with the EU.
A “no deal” scenario where both Britain and the EU impose tariffs on each other’s exports, is a “big worry”, since this would increase prices (and STL’s costs) significantly. The uncertainty caused by Brexit has already led to the collapse of a putative deal between STL and a major European manufacturer. This deal would have benefitted both firms. It could also delay its strategic partnership with Intergas Heating, the second largest boilermaker in Europe which would help Intergas increase its market share in the UK.
The prospect of tariffs, and higher prices, isn’t the only thing that Hood is concerned about. Regulatory harmonisation in the single market makes it easier for manufacturers to export boilers, but also means that consumers can be safe in the knowledge that a boiler manufactured in one part of Europe meets pan-European safety standards. American and Chinese boilers are manufactured “to completely different regulations”, which makes them “as different to the ones that we use as oil is from water” he explains. As a result, even a “super-dooper” trade deal with those countries would do little to lower prices.
For Hood, the ideal outcome of the Brexit negotiations is either a deal that “lets us keep our current trading arrangements with the EU” or a relationship “between Britain and the EU as close to the current one as possible”. If neither option is achievable, he would at least appreciate “some clear lines” that “set out what our future relationship with the largest trading bloc in the world is going to be”.
After all, when it comes to industries like heating, which rely on cheap but reliable imports of manufactured goods, “people don’t like uncertainty”.