Written by Jonathan Oldershaw, Director at Madano’s Insights practice.

Almost a year to the day since  the historic referendum vote in favour of Brexit, and with those negotiations now (just) underway, many in business have waited patiently for some ‘meat on the bones’ of where the much lauded preferential trade deals might occur?

And with a stunning absence of any details from our politicians and leaders, the Madano team thought it might be interesting to use our data mining and analytics skills to consider where might actually be a good place for the UK to start thinking about making deals and where might we be most successful.

We asked ourselves, what can we understand about the UK’s negotiating position based on the relative trading importance to other countries? In other words, not just the absolute size of the various trading partners, but where currently, countries export more to us, than we to them – where we might have an advantageous negotiating position. In other words, who’s got most to lose? 

The IMF further demonstrated the critical importance of the economic strength of trading partners to a country’ own economic circumstances in a research paper that constructed these trade relationships in a similar way. In a regression analysis, the authors found that – keeping all things equal – a 1% increase in economic growth amongst a country’s trading partners is correlated to a 0.8% increase in domestic growth.

Therefore, as well as being a measure of relative influence – the relationships themselves are extremely important to ensuring economic growth for a country.

How we have approached the task?

We started by creating a dataset of 40,000 trade relationships by collating data on the $ value of Goods exports for each country in the world to every other country using the UN Comtrade 2015 international trade statistics (the latest year for which data is available) as our foundation.

We should stress that this data considers ‘goods’ but not the trade of ‘services’. Principally because countries seem to be poor at reporting their service exports and imports, and so the data found was too patchy to use.

From this dataset of trade relationships, we have assessed the proportions of trade that exist between the UK and each of the UK’s trading partners.

So what have we found?

The chart below illustrates the relationships between the UK and our top 25 export destinations. These trading partners account for two thirds (66.5%) of UK exports.

The country dot sizes equate to the amount of UK exports that go to that destination.

The dotted line represents the axis of ‘negotiating influence’.

The lower half, below the dotted line, represents areas of potential ‘negotiating advantage’ (the proportion of exported goods to the UK is higher than the proportion of goods the UK exports to them).

The upper half, above the dotted line contains those countries where we have a ‘negotiating disadvantage’ (the proportion of exported goods to the trading country is higher than the proportion of goods the trading country exports to the UK.) 

So, in spite of Prime Minister Theresa May’s dash to the USA and the hands of President Trump, the US is the market where the UK has the most significant negotiating disadvantage – with the USA accounting for just over 15% of UK’s total exports, whilst the UK accounts for around 3% of the USA’s total exports. The US is followed by other major markets in Germany, Switzerland and China where UK exports proportionately outstrip their exports.

On the positive side, the UK has potentially an advantageous negotiating position with a cluster of countries, from Ireland and Norway, to the Netherlands, France, Belgium, Spain and Italy (Norway aside, all members of the EU!).

More pragmatism? 

However, given the UK is already struggling to find skilled negotiators, a job that hadn’t had much call for in the past 40 years, we thought it made sense to think pragmatically, and consider whether it may be easier for UK to start its other negotiations with trading blocks of countries, with ready-made agreements in place, rather than looking for bilateral arrangements.

The chart below shows the UK’s negotiating influence in relation to the major trade areas.

Unsurprisingly, the balance is skewed towards a negotiating disadvantage with these blocks overall – as they each combine the economic weight of several countries. However, here we need to consider the balance between the negotiating position of the trading block and that of its constituent members.  

This dichotomy will be at the forefront of the Brexit negotiations.

Taken as a whole trading block, we can see that the UK has little relative strength compared to the EU – together the other members account for over 40% of UK’s exports, whilst the UK accounts for less than 10% of the countries’ combined exports.

Yet, when considered with the outcomes from the Top 25 Exporter analysis, we can see that there are many countries where the UK has a stronger negotiating position at a bilateral level – including France, Spain, Belgium and Italy – as we account for a higher proportion of their exports than they do of the UK’s. 

Ireland is the country with the most to lose from Brexit, as the UK takes 14.1% of Ireland’s exports, with 5.6% of UK exports going the other direction. The Chief Economist at Ireland’s Central Bank has even suggested that a hard Brexit could cause Irish GDP to fall by 3%. This is also a concern for the UK. Indeed, in a recent joint letter to Greg Clark by the CBI, British Chamber of Commerce, Federation of Small Businesses, EEF and the Institute of Directors, maintaining frictionless borders with Ireland was listed as one of their three economic principles that should be sought in Brexit negotiations

But where else should the UK look ? The European Free Trade Association?  

Former Chief Secretary to the Treasury, Liam “there’s no money left” Byrne recently argued that the UK should re-join the European Free Trade Area – a collection now of four countries (Switzerland, Norway, Iceland and Liechtenstein. This group has access to the single market – although that includes the free movement of persons, the opposition to which was likely a big part of the decision for many Leave voters last year.

From a negotiating strength position, it all looks good on the surface – the UK has roughly the same proportion of its exports going to EFTA member countries as they together do to the UK (around 10%).  However, looking a bit more in-depth at what that trade involves shows a slightly different picture.

MIT Media Lab’s ‘Observatory of Economic Complexity’ has breakdowns of products traded between all countries – with fantastic interactive visualizations. For Switzerland, for example, we can see almost a quarter of the exports to the UK (23%) are in Precious Metals and Jewellery, and 5.7% are in Arts & Antiques. For UK exports, over three-quarters (77%) of its exports to Switzerland are Gold. A trade deal with Switzerland may not be the job creator that the Government is looking for.

Norway similarly has a complex picture. On the negotiating strength chart it looks like the UK is the standout winner – with 20% of their exports going to the UK, and just 1% of UK exports going to Norway. However, 87% of Norway’s export to the UK is in Oil & Gas – and the lights going out may not play too well with the voting public. Indeed, Norway’s European affairs minister last year indicated that Norway wouldn’t be keen on the UK joining – and would use their veto to block it doing so. 

Joining the North American Free Trade Association (‘NAFTA’) has similarly been touted as an option. John Weekes, Canada’s former chief negotiator on NAFTA, recently suggested that the UK joining, ‘would make a lot of sense‘.

NAFTA is clearly having some of its own problems – with President Trump calling it ‘the worst trade deal in the history of trade deals’ – negotiations are about to start between its three members as to what its future should look like.

As we have said, UK’s negotiating influence with the US tips heavily in their favour. However, the UK has a stronger position with Canada (accounting for 3% of their total exports, compared to 1% of UK exports). Mexico is relatively similar – and insignificant – on both sides, at 0.5% of Mexico’s exports and 0.4% of UK exports.

The UK joining NAFTA negotiations at this time could, however, offer negotiating strength for Canada and Mexico against the threatened Amerexit, and opportunities for existing members to gain better access to European markets.

And what of the much vaunted Commonwealth?

Former CBI Director General Lord Digby Jones has argued that business leaders want the UK Government to prioritise establishing better trade relationships with countries in the Commonwealth – such as Singapore, India and South Africa

Looking at the negotiation position that the UK has with trading blocks, we can see that SAFTA (South Asian Free Trade Association), CARICOM (Caribbean Community) and SADC (South African Development Community) all have the UK with higher negotiating strength, and all have a high number of Commonwealth members in them. 

However, this relative strength of the UK could in many instances still be due to its colonial legacy of economic and social depletion. British trade officials have been criticised for referring to their rekindling of trade negotiations with Commonwealth countries as ‘Empire 2.0’ – although is likely to be more of a sardonic moniker aimed at the perceived jingoism of those who believe that such a concept is possible. However, ultimately the UK’s relative trade strength here could be too powerful to make trade agreements viable – even if scepticism at the UK’s motivations could be overcome.

So what’s our advice to the Government… 

The current Chief Secretary to the Treasury, Liz Truss, famously vented anger at how much cheese the UK imports. However, for the time being at least it may be more prudent to employ less isolationist rhetoric. At 9.9% of a total £4.1bn exports, to slightly labour this example, France’s cheese makers are no doubt keen to maintain a good trade relationship with the UK

In the negotiating influence area, the UK should probably encourage perceptions that it’s a valuable trading partner – amongst EU member states and elsewhere. Ultimately, the argument of who needs the other most is heavily diminished if the country looking for preferential agreements starts by saying that they can go it alone.

As the Brexit negotiations begin, Madano will continue to use data and analysis to shine a light on to some of the key issues, helping you to better understand the rapidly evolving landscape and navigate a successful future path.


Data is principally based on reported export of goods. Where a country had not reported exports to another country, we checked whether the importing country had reported the corresponding import and added it in place. Reported import value is generally slightly lower than reported exports, as it includes things like delivery, and perhaps a few things falling off the back of the lorry.

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