Post-Brexit & Changing Global Trade: Analysis of UK Aviation Sector

This report examines the key trends in trade between Commonwealth countries, assessing the impact of Brexit on the UK aviation sector. It explores the challenges and opportunities faced by multinational enterprises (MNEs) in London within the context of a changing global trade landscape. The analysis covers trade volumes, flows, market share, and the influence of global forces like urbanization and technological change. The report highlights the potential negative impacts of Brexit, including increased costs due to border checks and regulatory changes, while also considering opportunities for strengthening international trading positions. Vodafone Global, as a case study, illustrates the challenges faced by MNEs. The conclusion offers recommendations for navigating the post-Brexit environment.

Post Brexit and the changing global trade landscape
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Table of Contents
Introduction......................................................................................................................................3
An overview of the key trends in trade of goods and services between Commonwealth countries4
Assessment of the impact of Brexit on trade and investment within the aviation sector in the UK6
Possible challenges and opportunities from the perspective of a multinational enterprise (MNE)
in London post Brexit within the context of a changing global trade landscape.............................8
Conclusions and recommendations...............................................................................................12
Reference list.................................................................................................................................14
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Introduction
In this jeopardized business environment, globalization has created adverse impact on overall
performance at global scale. Globalization refers to the increasing trend of interaction between
people and companies within worldwide scale. With the intense transformation within
technology and global trend of business, organization has faced both positive as well as negative
consequences. This report will enlighten the key trends in trading service between
commonwealth countries for understanding this substantial impact. Impact of Brexit in the UK
aviation industry will be narrowed down to understand current link of economy as well as global
business performance. Difficulties in Multinational bushiness preference will be analysed to
identify the field of business improvement.
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An overview of the key trends in trade of goods and services between Commonwealth
countries
Key trends of goods and services are required to be analysed for understanding following status
of trade in common wealth countries. These key trends are as follows:-
 Volume in international trade in goods
 Trade flows across region
 Market share of trade in services
The reflection of these keys is indicated in trade through import as well as export propensity. As
per report of 2013, combined exports of goods and services are valued at $3.4 trillion. Here 53
commonwealth members are combines and 15% of total world exports have been visualised.
Since 2000, members have collectively grown their share just above 50 percent. In this
landscape, growing significance of developing countries in the world economy has presented
vast trading opportunities for the commonwealth members. In China, commonwealth member’s
trade expansion is assumed as spectacular nature. Average 12 percent of commonwealth goods
import is sourced from China (thecommonwealth.org, 2015).
2012 2013
12%
13%
14%
15%
13%
15%
Share in exports of goods and services
Share in exports of goods
and services
Figure: Exports share of goods and services in commonwealth countries
(Source: thecommonwealth.org, 2015)
Impact of key trend in the commonwealth countries from the scenario of business economy
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According to Taylor Buck and While (2017), commonwealth members have fully recognized the
value of international trade from the angle of achievement on social as well as economic
progress. Social, economic as well as fundamental changes have been taken place in the global
trade, which influencing the direction of trade. Such changes are mainly driven by the factors of
Global value chain or GVC. As per the opinion of Cocks (2016), lack of dynamism in trade
multilateralism has created impact on business actions. The global economic slowdown has been
visualized during the global financial crisis in 2008 (ons.gov.uk, 2017).
At that time world economy was less than 3 percent in comparison to average growth of 7
percent. Now the contextual analysis is required for understanding this changed rate from the
dimension of global forces. It has significant impact on the trading of goods and services. As per
the theoretical demonstration of McKinsey, four global forces are urbanization, technological
change, aging challenges and financial connections. Financial connections are related with both
trade and people. The countries are becoming much more urbanized. As per the report, 65
million per year rate is visualized in the scale of urbanization. It has been identified that
emerging economies are also major forces. By 2025, emerging economies will grow up to 75 %
faster. In relation to urban consumer class, 150% increase in annual consumption has been
expected between 2010 and 2030 (wti.org, 2015).
Figure 2: Global forces
(Source: Seabrooke and Wigan, 2017)
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GlobalforcesUrbanisationDigitalisationAgeingparameter

On the other hand, Seabrooke and Wigan (2017) commented that technological change has also
driven significant impact on the business. In the current period, technological breakthroughs are
speeding up, where consumers prefer online systems to fulfill their daily needs. In this scale,
14% increase in global workforce has been visualized in proportion to increase in global life
expectancy. However, productivity is dependent on this workforce. If the productivity not
increased, GDP growth of the developing countries can be declined. The volume of trade, people
and finance are increasing and reflected in systematical changes on the economic stability. The
trends in the good and service trade have experienced challenges from the globalization. These
consequences are increasing interdependence of location and increasing interdependence of
firms.
Trade in both goods and services have direction to gain maximum increase on GDP by 2020. In
this scale, total value of foreign investment is an integral part. As per the report, United States,
East Asia and Europe dominate the global FDI. They are also dominating the global market
region of South America, Middle East, South East Asia and Africa. These are increasingly
attracting the investment flows. Flows of capital are broadening remote geographies and
populations. Financial globalization has also created impact on the cross border lending. As per
the current report, some US and UK banks have reduced their foreign business However, new
era of financial globalization has maintained more stability, which is effective to maintain higher
share of gross capital flows. The commonwealth has made up small part in UK trade. As per the
report of 2015, 9% of total UK exports went to Commonwealth in 2015. EU has accounted 53%
of UK imports. Before Brexit, UK services export to commonwealth has been tripled from £8.5
billion to £22 billion. Therefore, key trends are the major outline, which have hampered this rater
after Brexit in UK.
Assessment of the impact of Brexit on trade and investment within the aviation sector in
the UK
It has been visualized that the outcome of UK’s referendum on EU membership can display
opportunities in UK economy. Travel and Aviation industry has been influenced through
international politics as well as trade. Any major changes can create direct impact on every
dynamics of these sectors. However, the governmental referendum has created uncertainty on
aviation sectors.
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As per the report, the country is facing a tradeoff for accessing the European single Aviation
market. The immediate impact on the air traffic can be governed through understanding two key
variables, which are sterling exchange rate and economic activity. It has been visualized that
Brexit has given a negative shock to UK economy.
In this scale, uncertainty has been occurred in the trading and investment decision on aviation
industry. This status is occurred due to transmission via financial channel.
Exchange rate impact
UK air market is primarily dominated by the outbound traffic. As per the report of 2015, 53.9
million visits have been recorded. Volatile trading conditions has been occurred while currency
become weakened as a result of Brexit. The weaker currency has created adverse impact on the
outbound trips for UK inhabitants. As per the report of Guardian, UK aerospace industry issues
can be occurred due to lack of Brexit trade deal. In the report it has been analysed that increased
border checks can create additional £1.5bn cost (Roberts, 2017). Approx £10bn of annual exports
are destined for the EU. The impact of increased customs checks are also an issue for maintain
the standard economy of industry. In order to deal with the other country parts across Europe,
industry faced expensive tax rate.
Impact of governmental policy
As per the report of telegraph, Government has benne urged to focus on aviation industry in
order to avoid hit of trade as well as investment. Various arguments have displayed that the
Brexit has significant impact on regulatory framework in aviation trade. For preserving the UK’s
air connectivity, government has to ensure a timely renegotiation on aviation treaties. UK’s
aviation manufacturing sector has been signaling out due to potential concern of such regulatory
policies. As per the report of 2016, the UK’S trade surplus in aircraft parts and aircraft was
largest than any other country’s good sector. Aviation manufacturing sector has significant
impact on the global supply chain. Economists say that competitiveness of UK sector is
dependent on the regulatory barriers during post-Brexit (West, 2017). If now the industry
become goes to achieve their vision as global player, the additional tax can penalize the travel to
far-flung locations. Development of new airline route between two metropolitan can lead to 4.6
pc increase in venture capital investment (Roberts, 2017). As per the opinion of Schnapper
(2015), better transport linkages can enable human capital and investment for accessing more
freely across the borders. Such factor can improve the return on investment.
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Impact in market access
As per the report, EU is easily can be the biggest destination market that accounts 54% of
commercial flights and 49% of passenger flights (iata.org, 2016). UK is very important
destination market, where air travelers across Europe are involved but adverse impact is
visualized in the share of business operation. In this term issues are occurring from the
standpoint of policy freedom. In order to foster cross country travel and manufacturing, industry
has faced massive issue in trading actions.
Impact from Cross border business
Therefore in Aviation industry, UK has faced prospect of ‘Hard Brexit’ due to lack of free trade
agreement. As per the report, trade relation between UK and EU has hampered the mutual
relationship in World trade organization. UK is not dependent on the intra-regional trade, which
is displaying that country’s extensive involvement in global spectrum.
On the other hand, Brexit has supported the industry to strengthen the international trading
position. UK is prohibited from negotiating bilateral trade agreements with global partners.
However, foreign investments can be declined if the Brexit create adverse impact on the
economy of other countries. For instance, Brexit can create impact on the Australian tourism
(gov.au, 2016). Due to impact of Brexit, customers are not travelling to foreign countries due to
their limited income status. This scenario can be analysed from the standpoint of aviation
industry. In cross boundary parameter, foreign investment is also a part to maintain trading
relationship with other countries. In this scenario, impact of global forces has been visualized in
the trade and investment purpose at UK aviation industry (deloitte.com, 2017). In order to
resolve the financial as well as operational consequences, long-term planning needs to be
structured.
Possible challenges and opportunities from the perspective of a multinational enterprise
(MNE) in London post Brexit within the context of a changing global trade landscape
In the current period, competitive advantages are associated with the location strategies of MNEs
or multinational enterprises. In this scale understanding is required on international business. As
opined by Lea (2016), this business is related with the transaction across national border for the
purpose of consumer satisfaction as well as organizational profit. In this standpoint, foreign
direct investment is related with the equity fund, which has invested in other nations. Marketers
often have misconception about MNEs. They think organizational ambition is to earn most of the
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revenue in the overseas business (ecb.europa.eu, 2008). However, they are earning most of the
revenue in the home regions. They are not engaging in the global competition but they are
involved in the regional competition. As per the current report, more than 50 percent of trade is
made by the MNEs (grantthornton.co.uk, 2016).
Vodafone Global enterprise limited is a multinational enterprise and headquartered at London.
From the 2007, the organization is serving as a provider of telecom and IT for large corporate
customers. Now analysis is required to understand positive and negative impact of Brexit in their
business process as a part of multinational enterprise.
Challenges in business operation of Vodafone
After Brexit in 2016, Vodafone has faced major consequence in the field of employment. As per
the report, 13000 employees might be in risk due to adverse impact on freedom of capital, people
and goods, which are related for the successful business operation. They said that group revenue
fell by 3.9% due to volatile foreign exchange movements after Brexit (lse.ac.uk, 2017). Hard
version of Brexit has been faced by them on the field of economic consequences that force them
to access single market. Therefore, Vodafone has decided to move headquarter outside the UK
because of Brexit. They decision is quite shocking as various opportunities are still present in
UK marketplace. They think that their cross boundary business will be hampered through
changed regulation after Brexit. Vodafone said that they have achieved their growth in the UK
market due to free trade policies as well as free movement of people. They have also displayed
that 55% group profits in the last financial year from European operations. However in UK this
percentage was only 11%. Therefore, they are facing issue in taxation, movement policy as well
as flow of capital (Sgeffield, 2016). They think they are losing single market access due to such
consequences in business operation. Therefore, they have decided to move headquarter from the
current location.
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Figure 3: Challenges and opportunities for MNEs
(Source: Sgeffield, 2016)
From this standpoint, it can be said that Brexit has created negative impact on their overall
business process to maintain constant flow of capital in single market. As stated earlier,
multinational enterprises can get maximum revenue in the home location rather than the external
countries. In this case, Vodafone has not gain standard profit level in the last financial year due
to impact of Brexit. In this scale certain separation from UK, has made them vulnerable in the
single market. Here issue has been occurred due to restriction or modification in cross boundary
business process. Therefore, currently organization is not seeing any hope in present UK
business after Brexit.
Opportunities in business operation
On the other hand, Brexit has positive impact too. It can create positive environment for the
Vodafone through decreasing the market overcrowding. In addition, Vodafone can get rid of
multicurrency issues. It will solve the problems for converting the Euros to pounds or vice versa.
Due to presence of independent monetary policies, organizations can get standard financial
performances. In addition, UK government has lowered the tax on various scales that will foster
standard business growth. It is true that Vodafone has experienced massive economical downfall
in the period of 2016-2017. However, they have to keep patience for achieving standard business
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growth in the market after Brexit. It has been visualized that, various positive attributes are
remain present in the current market place of Vodafone.
Governmental support is effective here to protect the market stability of Vodafone in the UK
market. Competitive force is also an important factor to understand market performances. In this
context, Brexit will provide them scope to be dominant at the market level. The organization is
listed in FTSE 100 index and they have achieved positive growth at all level. In the UK market,
positive economic viewpoint is visualized in the scale of employment, sartorial growth as well as
GDP. From this view organization can face positive opportunity to maintain long term growth.
Current market stability is not as per the CEO expectation, but there is a chance to get positive
business dimension. Organization has to take initiative on the internal business process through
supervising as well as recognizing the gap in the performances due to modified governmental
referendum.
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Conclusions and recommendations
It can be deduced that due to impact of transformed global trend of business, organization has
faced both positive as well as negative consequences. In this case major key on trading of global
business has been understood. These keys are related with the substantial constant flow of
capital, market share and volume. These keys are the indicator in trade within import as well as
export propensity. Through understanding the impact of these keys, growing significance of
developing countries in the world economy has been understood as vast trading opportunities for
the commonwealth members. Changed trend of trading has been criticized through McKinsey
model. These model highlights four global forces, which are urbanization, technological change,
aging and financial connections. It has been analysed that Before Brexit, UK services export to
commonwealth has been tripled from £8.5 billion to £22 billion. Now the global business pattern
can be directed on negative dimension if the financial risk can be emerged. In the current period,
Brexit has created negative impact on the overall business process due to changed dimension of
regulation, business policies as well as economical stability. In the analysis of current UK
aviation industry impact on trading as well as investment has been realized. Report has identified
that the UK is facing a tradeoff for accessing the European single Aviation market. In this scale,
uncertainty has been occurred in the trading and investment decision on aviation industry. On the
other hand, opportunities and challenges in post Brexit period through considering case scenario
of Vodafone, which is multinational enterprise. Based on this analysis recommendation has been
suggested as follows.
Recommendation for aviation industry
 Airlines businesses need to adopt a sensible approach towards risk planning to struggle
against emerging economic consequences.
 They should consider different ranges on financial regulation
 As short term plan, industry should take sincere focus on foreign exchange volatility
 They have to restructure their business policies through understanding the consumer
perception
 They have to discuss for structuring a new line to resolve barrier on cross boundary
business performances
 They have to take positive initiatives for the manufacturing process too, where taxation
has created adverse impact
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Recommendation for Vodafone as a MNE As per the case scenario of Vodafone, they can get positive market environment through
taking modification on internal business structure. In this landscape, they have to
understand the requirements of stakeholder management. Through segmenting the
stakeholders in required level, organization can handle their share growth from positive
dimension. In the new market field, they have to employ more effort on strategic
management towards business field. Stakeholder management is also required to reduce
the level of uncertainty. If stakeholders are not aware about the present business
consequences, they cannot deliver required strategic effort as per business commitment. They have to rethink on their decision of headquarter movement through understanding
the positive outcome of Brexit in UK market zone. They have to understand the threats of
global forces that have created impact on foreign business policies. Through proper
understanding they can regain their profit growth in competitive market.
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Reference list
Direction of intra-commonwealth average goods trade
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