Forget the EU, UK businesses want to trade with China
From UK businesses shifting trade to China, the message is clear: growth matters more than geopolitics. The sooner the government realises that the better, writes Jane Galvin
While politicians celebrate the ‘reset’ of UK-EU relations at Monday’s London summit, British businesses have already cast their vote – and Europe is losing. Our latest Santander Trade Barometer shows UK firms are doubling down on faster-growing markets like China and the US, despite political headwinds. The message from boardrooms is blunt: growth potential matters more than geopolitics. As Westminster debates trade policy, businesses are already moving on – and policy needs to catch up.
The ink is barely dry on the recent UK-US trade agreement, with its security provisions for Britain’s steel and pharmaceuticals industries, yet it has already drawn criticism from Beijing. China’s foreign ministry told the Financial Times that “cooperation between states should not be conducted against or to the detriment of the interests of third parties” – diplomatic language that nonetheless signals potential complications for UK firms with Chinese connections.
This kind of geopolitical brinkmanship is the new normal. But for many UK businesses, pragmatism is winning over politics. We have found that 52 per cent of UK firms now see overseas trade as more critical due to domestic economic challenges – more than double the figure from just five years ago – and businesses cannot afford to wait for perfect political conditions.
Firms turning from EU to China
That commercial imperative is already reshaping how businesses choose markets. Despite rising tensions, China has re-entered the UK’s top ten export destinations for the first time since 2022. Meanwhile, traditional EU markets like Ireland and Italy have dropped out of the top 10 altogether with future trade interest in Ireland falling to just seven per cent, down from 13 per cent in autumn 2023, while Italy fell to eight per cent from 13 per cent over the same period – highlighting a gradual yet steady pivot away from the EU bloc.
The US remains a cornerstone, with 54 per cent of UK firms focusing their efforts there. Even Germany, still our top export destination, has seen declining interest, falling to 55 per cent from 59 per cent in autumn 2024. While Monday’s Summit secured progress on issues like food exports and defence co-operation, these figures signal that any agreement must acknowledge the undeniable reality that many businesses have already decided to look elsewhere.
Why this shift? Because the prize is growth. These global markets offer scale and opportunity that is simply not available at home or in familiar EU markets. For many businesses, commercial viability clearly takes precedence over geopolitical positioning – even when those opportunities lie within politically complex regions like China.
Commercial concerns trump geopolitics
The post-Brexit deal announced this week – including provisions for easier agrifood exports and a defence pact – may support selected sectors, but it does not undo years of drift. This pragmatic approach carries significant implications for the government’s local growth mission. To support domestic prosperity through international trade, policymakers must recognise and facilitate this commercially driven pivot rather than cling to Euro-centric trade models. The UK’s diplomatic balancing act – courting Washington, reassuring Beijing and rebuilding ties with Europe all at once – requires a much clearer framework to empower businesses navigating these complex waters, not just wishful thinking.
Our research highlights growing demand for practical support. Nearly a third of UK companies (29 per cent, up from 22 per cent in autumn 2024) are now seeking assistance in identifying the most promising markets for their specific offerings. Furthermore, 33 per cent of companies are calling for tax incentives to reward expansion into new markets, and another 33 per cent want help cutting through foreign bureaucracy.
Therefore, while the government navigates its complex diplomatic relationships, a crucial element of its strategy must be to empower businesses with the tools and knowledge to make informed commercial decisions. This includes providing practical support in navigating foreign regulations, offering incentives for exploring new markets and enhancing guidance in identifying the right regions for specific products and services.
Ultimately, in a world where geopolitical tensions show no signs of abating, it is the facilitation of informed commercial decision-making that will unlock sustainable growth and bolster the UK economy. The message from businesses is clear: commercial viability trumps geopolitical positioning – and policymakers would be wise to take note.
Jane Galvin is head of corporate clients at Santander UK