LSBM303: Critical Issues in Business Management - Trade and Brexit

This report delves into critical issues in business management, focusing on the evolving landscape of trade among Commonwealth countries and the increasing prominence of developing nations. It analyzes key developments in the trade of goods and services, highlighting the influence of regional trading arrangements and the role of China. A significant portion of the report assesses the impact of Brexit on trade and investment within the creative industries sector in the UK, exploring challenges related to EU funding, potential economic impacts, and the strategic importance of these industries. The report also considers the challenges and opportunities faced by multinational enterprises in the post-Brexit creative industries landscape, providing a comprehensive overview of the complex issues affecting international trade and business strategy.

Running head: CRITICAL ISSUES IN BUSINESS MANAGEMENT
CRITICAL ISSUES IN BUSINESS MANAGEMENT
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Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
Significant Developments in trade of goods and services between Commonwealth countries. .2
Increasing prominence of developing nations.............................................................................4
The Impact of Brexit on trade and investment within the creative industries sector in the UK..6
Possible challenges of multinational enterprise (MNE) in London in the post-Brexit creative
industries sector.........................................................................................................................10
Opportunities.............................................................................................................................12
Conclusion.....................................................................................................................................13
References......................................................................................................................................14

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Introduction
Trade is identified as a major means of support of the Commonwealth, further serving as
a chief contributor to productivity, increase, employment as well as livelihoods for all of the 53
member nations. Reports of Lea (2018) have mentioned that the combined exports of
merchandise and services of 53 Commonwealth members have been estimated till 2016 to be at
around $ 5.5 trillion, which is about 25% of the world’s aggregated exports. However, Shahbaz
et al. (2014) have stated that around half of these exports come from urban country members,
whereby other members since 2005 have cooperatively intensified their distributions from 46%
to slightly above 55%. The increasing impact of developing nations in the world financial system
illustrates huge trading opportunities for wide range of Commonwealth members. Furthermore,
according to Lea (2018), around 35% of Commonwealth industrial countries’ goods are exported
to budding countries accounting up from only 21% a decade ago. However, on the whole, since
2000, the percentage of Commonwealth exports primarily intended for developing nations has
amplified from 32% to 51% (Wu, 2016). The following report evaluates the key developments
and progress in dealing with goods and services between the 53 Common Wealth nations.
Additionally, the paper essentially focuses on the consequence of Brexit on trade as well as
investment within the creative industries segment in the United Kingdom by assessing potential
challenges and scopes of multinational corporations in the international trade landscape.
Discussion
Significant Developments in trade of goods and services between Commonwealth
countries
The global trade landscape has been undergoing significant alterations whereby the
Commonwealth members have been adapting to such latest realities. However, Ottaviano, Peri

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and Wright (2018) have stated that as business dealings with the South has been intensifying, a
critical challenge for several developing nation members relies on the improved harnessing of
these opportunities in order to build their industrious as well as trade facilities and further expand
their exports, predominantly to China and other budding markets. Small states specifically in
recent times have been facing confrontations with critical challenges and have encountered
deteriorated export direction in their financial system. Furthermore, Nathan (2014) is of the
opinion that well-established nations tend to sustain as vital markets. Thus, Commonwealth
developing nations must persist to discover openings for trading further with them as well as
effectively using obtainable favoured schemes along with extensive trade and investment
collaboration (Shahbaz et al., 2014).
There has been witnessed a considerable development in spheres of Regional Trading
Arrangements (RTAs), with the majority of Commonwealth members partaking in a number of
these means. Effectual execution of RTAs however has been a critical impediment for many
(Neufeld, 2014). Thus reinforced provincial collaboration trade with behind-the-border actions
and guaranteed enhanced linkage must be specified with the utmost concern. Comprehensive
studies of Gray (2014) have further mentioned that an elevated number of merchandises are
produced through production system engaging various countries. Though some of the
Commonwealth members have benefitted from this improved connectivity, several nations such
as Africa, Caribbean along with Pacific Ocean which has been chiefly natural resource-based
exporters have experienced restricted ability to successfully associate with global value chains
(GVCs).
At this juncture, authors have shed light on the importance of rules-based multilateral
trading system. The implementation of the 2030 Global Agenda for Development, trade

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multilateralism must be reliable with the rules-based multilateral trading system and essentially
contribute in attaining the Sustainable Development Goals (SDGs) (Hoekman, 2014). Reports of
Booth et al. (2015) have emphasized on the essential changes which have been occurring in
international trade. However, decisive renovations are in progress that have been controlling the
causes and expansion of trade, its outlines and thus give rise to individual countries’ proportional
and competitive advantages. Such trends in the view of Siles-Brügge (2014) have been primarily
stimulated by factors related to rapidly emergent trade of developing nations with intensifying
trade interconnections in GVCs with rise of RTAs and a deficit of vitality in trade
multilateralism along with an approaching need for measures to combat climate change.
Moreover, in contradiction to the conditions of the recounting trade setting, the global society
has approved the Sustainable Development Goals (SDGs) whereby global trade has an
imperative responsibility to take (Neufeld, 2014).
Increasing prominence of developing nations
Over the last two decades, reports of Shahbaz et al. (2014) have revealed that share of
budding countries in international GDP has amplified from 25% to an approximate of 45%
whereas their share in global merchandise trade has reached from 35% to 55%. This growth has
essentially led trade profile of Commonwealth countries to undergo significant developments
whereby the overall merchandise exports to developing nations has been in proportion to the
aggregated exports that increased from 26% in 2000 to 50% in 2016 (Wu, 2016). Furthermore,
Lea (2018) has mentioned that around 20 Commonwealth countries during 2000 have obtained
around half or extra of their merchandise imports from developing areas which augmented to
52% in 2017. Meanwhile, Nathan (2014) has stated that for several countries, operating business
dealings with China has been one of the crucial characteristics of international trade. Since 2000,

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total Commonwealth exportation aimed for China has amplified substantially, from $25 billion
to $270 trillion and further trades in China have increased significantly rising from $51 billion to
$365 billion. Additionally Ottaviano, Peri and Wright (2018) have mentioned that for several
countries, forming trade relations with China has been one of the essential types of international
trade. However, it is fundamental to mention that since 2000, Commonwealth exports to China
in totality have amplified greatly ranging from $24 billion to $275 trillion, and imports from
China have grown roughly that is from $51 billion to $426 billion (Lea, 2018).
At this juncture, scholar like Wu (2016) has mentioned the way China in 2000 has
accounted for around 12% of imports for just a single Commonwealth member whereas there has
been witnessed a rise of corresponding number of members to 35. Meanwhile, emphasizing on
exports of merchandise, whilst there has been noticed a wide-ranging raise in exports to the
Chinese market did not receive considerable amount of importance. For Shahbaz et al. (2014), as
many as 40 Commonwealth members, less than 8% of their exports in 2016 have been intended
for China. Consequently, the Chinese market sustained its high value but as of yet available as a
vital export destination for majority of Commonwealth countries. Nevertheless, though there can
be identified several benefits of South-South trade, major challenges tend to linger, principally in
expanding exports to rising financial system. Conversely, regardless of their declining
comparative implication, developed nations have been sustaining as vital markets. Mendyk
(2014) has stated that major proportion of the advanced industrial countries have maintained a
range of favoured trading schemes for diverse groups of developing nations. However, it has
been noted that the value of tariff inclination has significantly deteriorated because of
independent as well as regional trade liberalisation.
The Impact of Brexit on trade and investment within the creative industries sector

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in the UK
The UK reflects a vibrant and extremely economical charisma in the creative as well as
digital technology segments that includes services for telecommunications. Furthermore, the
tourism business of the UK is recognized as one of the most pioneering in the world. These are
however seen as the only industries which have its position under the realm of the innovative
Digital, Culture, and Media & Sport Department. Studies of Mendez-Parra et al. (2016) have
understood the importance of EU funding in these these sectors as a mechanism to open other
types of financial support such as public or private. However in recent times, insecurity over the
nature of long-term investments have the tendency to be alleviated by a vital Government
mapping use starting specific lines of accessible, direct European funding for creative as well as
cultural organisations, and a general idea of future subsidy. Meanwhile, Lawless and Morgenroth
(2019) have noted the way Brexit has been posing critical disputes for all these creative sectors
due to the indecisive character of the potential authoritarian setting in addition to the over-riding
anxiety. Drawing significance to these factors Booth et al. (2015) have emphasized on the
importance of the Government to establish it as a subject of urgency to the parts whereby it takes
into consideration that Brexit presents wide avenues for valuable authoritarian reforms, and the
way it aims to strategically benefit from such prospects, and to areas whereby it supposes that
upholding such uniformity would be the regarded as the most constructive result, for the business
as well as consumers.
Benefitting directly from EU funding
Reports of authors have revealed that over 17% of organizations operating in the creative
sector of the UK has been benefitting directly from one of the EU and global funding resources.
Furthermore, Crescenzi, Gagliardi and Iammarino (2015) have noted that although no single

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fund controls, however the Creative Europe is most generally selected to be around 4% followed
by ERDF on 3%.
Proportion of organisations benefitting directly from EU and global investment resources
Source: (Booth et al., 2015)
The amount of capital and profit funding acquired from each of these resources tend to
varies radically. According to Spear et al. (2018), approximately, the major sum capital funding
has been derived from ERDF that is mean £783,625, while Interreg Europe averages the major
revenue funding pots that sums up to mean £306,000. Furthermore, larger organisations in
relation to rate of revenues or number of employees reflect a propensity to obtain direct funding
from EU along with international sources rather than depending on smaller organisations.
However, Mendez-Parra et al. (2016) have observed no considerable variation in the chance to

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have received EU or international funding by region.
Sum of subsidy received from each source
Source: (Mendez-Parra et al., 2016)
Indirect economic gains from EU funding
Regardless of the existence of financial support in UK organizations around 32% of
organizations have reported to have been indirectly benefitted from the EU funding. For
example, Spear et al. (2018) have noted that the Hall for Cornwall operating as a leading theatre
has experienced an increase of annual turnover of around £6.1m obtains financial support from
Arts Council England along with Cornwall Council and is recognized as a National Portfolio
Organisation. However, as per the reports of authors, Hall for Cornwall recently has been
undertaking a major investment project estimated around £18.7million in total. It has been noted
that among the financial funding around £5.5 million has been derived from the Arts Council
England, £ 2.3 million from the Treasury also around £2.5 million from the European Regional
Development Fund (ERDF) (Hallforcornwall, 2019). On the other hand, authors have mentioned

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the critical challenges faced by the that Hall for Cornwall as the government departments the
organization is dealing with have been impacted by the ambiguity concerning Brexit further
causing delay in proper arrangement of the project funding decisions. While in the view of
Schoof et al. (2015), the ERDF funds must be secured in such cases regardless of the result of the
Brexit negotiations. Cornwall has been a big beneficiary of EU grant, as it was the single area in
England considered poor enough to be eligible for ‘Objective One’ funding, which has been
purposed to develop the financial performance of hostile regions of the EU.
Impacts of reduced freedom of movement
Arts and culture stakeholders have been highly cynical regarding the probable impact of
abridged freedom of progress of people, goods as well as services on their work. Following
analysis of Sampson (2017) on the potential impact of Brexit, it has been noted that leaving the
EU for a higher rate of individuals engaged in dance and visual arts would pose an
unconstructive impact on every segments of their work in comparison to the organisations
specialising in any other art form. Meanwhile, Van Reenen (2016) has observed that elevated
percentage of stakeholders in London would experience a depressing impact evaluated to any
other province of the country. For example, London-based organisations exhibit greater
inclination in recruiting EU nationals in comparison to organisations based in other regions.
Additionally Sampson (2017) has mentioned that majority of London business enterprises
depend greatly on the four freedoms related to the EU than organisations based in other regions.
For example, around 62% of London stakeholders reported that reduced freedom of movement
would pose critical challenges to the future touring within the EU in comparison to no more than
38% of stakeholders based in the Midlands and the North.

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Impacts of reduced freedom of movement
Source: (Van Reenen, 2016)
Possible challenges of multinational enterprise (MNE) in London in the post-Brexit
creative industries sector
London’s role as a centre for commerce has been aligning with its recognition as a
cultural inspiration. According to Welfens and Baier (2018), London’s artistic offering has been
exceptional not only for its dimension but because of its diversity and enthusiasm. It constitutes
prominent museums, art collections along with institutions together with worldwide media and
entertainment trade thus being a significant support for artists, start-ups as well as creative
entrepreneurs and a successful night time financial system. Reports of Oliver and Williams
(2016) have identified a genuine risk of increased preservation taxes on the repatriation of profits
and shares. However, reports of Taylor-Gooby (2017) have revealed that an EU directive has
been offering reinforcement in this area, in the case of a Brexit, a U.K. company with
subsidiaries in EU member states would require depending on the U.K.’s wide-ranging network
of double-tax agreements in order to avoid effective double-taxation on intra-group payments,

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interest, and fees. The potential imposition of preservation of taxes on the repatriation of
dividends specifically out of Europe through a significant U.K. investment structure may pose
challenges to a significant number of multinational enterprises (MNEs) in London. Furthermore,
Schoof et al. (2015) have noted that the reduced freedom of movement has high propensity to
challenge the preservation of diversity in London’s creative sector resulting the U.K. businesses
to obtain creative–fortuitously and improve level of specialization to act concerning political
restrictions.
Impact on recruitment
Reports of Taylor-Gooby (2017) have revealed that around 6.2% of the creative sector’s
workforce of London is EU nationals, which is comparable to the 7% level of EU
nationals engaged in the financial sector along with 6.8% share of EU nationals in the workforce
as a whole. Drawing relevance from this data, authors have mentioned that businesses have been
shedding light on the critical challenges posed by Brexit on recruitment in creative sector.
Moreover, thriving candidates from the EU have been rejecting job offers due to the growing
level of uncertainty over the potential status in the UK. According to Oliver and Williams
(2016), there has been a genuine threat that businesses reliant on non-UK employees will transfer
operations if changes to UK visa laws hamper recruitment. Such threats according to authors
have been compounded by the impending loss of undemanding access to EU markets. The EU is
as an imperative destination for UK creative sector exports, with just under half of the business
exports going to the EU. MNEs have been showing high inclination to transfer production in
order to bring significant losses to GVA as well as jobs in the UK creative industries. Taylor-
Gooby (2017) are of the opinion that following Brexit, an advertising and marketing business
might encounter challenges to engage skilful designer from Spain further resulting challenges