The Trump Effect: What the Election Means for UK Business

Author: Russell Smith
December 12, 2016

On November 8th, 2016, the world was stunned — our small business accountants from Leeds included. The polls put Hillary Clinton ahead, the experienced statesman with the backing of the people — or so everyone thought. Yet, Donald Trump, the most controversial candidate in history, won the 2016 presidential race.

Donald Trump’s victory means a lot of things to a lot of people, and we don’t just mean inside the United States. The most powerful and influential person on the planet, the will of the US President has a sweeping effect on the international community — not least of all on their greatest and longest standing ally, the UK.

The USA is Britain’s biggest trade partner, so the result of the election promises to have consequences for our economy. Deciphering these consequences is on the agenda for today’s blog.

 

Another Bump in the Road

We recently wrote a blog about our views on Brexit and, in many ways, the result of the US election is very similar to the results on June 23rd. Stunning the world, they had an immediate impact on the global economy, causing stocks to plummet. As the dust settled, things started to stabilise, but we aren’t out of the woods yet.

Trump’s victory brings with it uncertainty.

Nobody knows what Trump is actually going to do. His policies have been shifting and vague at best over the course of his campaign. He is also the most un-presidential candidate ever voted into office, some argue to his credit, but this also makes the markets uneasy.

An inability to predict Trump’s economic policy puts the US in the same murky waters as the UK is currently in with Brexit. It’s unprecedented and it’s uncertain. With uncertainty comes a lack of confidence and stagnation.

However, unlike Brexit, which will take years to resolve, Trump takes office in January, meaning this period of uncertainty for the US will only last a few months. Once he takes up the mantle and starts rolling out policies, things will start moving. But in which way?

 

 

Trump’s Words: Which Should We Believe?

Trump has made two wildly different claims over the course of his campaign. One claim is hugely beneficial to the UK, the other a lot less so.

1. Trump states he will put up trade barriers, claiming the US should be more independent.  

2. Trump states the UK will see a boost in its already impressive trade deals with the US post-Brexit.

So which do we believe?

Over the course of a four-year term, Trump will struggle to internalise trade. With such a reliance on big partners like China, Britain and Germany, it is the opinion of our small business accountants in Leeds that trade barriers will more or less remain the same.

If our prediction is correct, this could prove beneficial for the UK. As Trump nears the end of his term, the UK will be leaving Europe. At this time, we’ll be looking to increase trade with international bodies beyond the European Union and Trump’s promise to boost our trade with the world’s greatest economic power would provide immense benefit.

Of course, with Trump’s flip-flopping, it’s impossible to say for sure. He could keep his other promise, to build trade barriers, increasing cost for imports and internalising much of the USA’s economic reach. Obviously, this would have a negative impact on the UK economy.

 

How Our Small Business Accountants from Leeds Think Things Will Change for SMEs

The biggest economic impact of Trump’s presidency will be seen by those SMEs who deal in international trade. Those who work domestically won’t see much change, with Brexit posing a much greater threat. No matter how President Trump chooses to approach international trade, the UK will still face instability as the result of Brexit.

However, for those businesses that deal internationally, Trump could either prove life-saving or destructive. If he boosts trade to the UK post-Brexit, SMEs will benefit. If he cuts ties, it will become much harder for them to trade with the US, given their limited resources when compared to larger companies.

So what can SMEs do?

For those dealing internationally, this is a really trying time. With Europe looking unstable and the US even more so, it is time to seek out deals with countries further afield. For example, Trump has made numerous threats to the Mexican economy and, despite its growth, could jeopardise that.

British businesses looking to maintain trade could look south of the border, to a country that is facing similar instability thanks to the Trump administration — a country that will be looking to create firm and stable ties. Emerging economies are also worth keeping in mind, with boosts to financial security being seen across a number of countries in Africa, Asia and South America.

 

 

Concerned about how the Trump effect could impact your company? Contact our expert small business accountants in Leeds  and we can help make you a financial plan to secure your future.

 

Image via João Martinho / Flickr

 

 

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