We caught up with the Head of Trade Origination & Advisory at Natwest Bank, to talk about trade in the UK, given the current uncertain geopolitical climate around Brexit. We asked Rowan Austin about the current outlook for UK SMEs, trade barriers and how the bank is approaching trade and transaction banking digitisation through some of its initiatives at Sibos 2019.

Featuring: Rowan Austin, Head of Trade Origination & Advisory, NatWest

Host: Deepesh Patel, Editor, Trade Finance Global

I’m Rowan Austin. I work for Natwest where I am Head of Trade Finance, Origination and Advisory. So we cover large corporates across the UK, Western Europe and the US, for products ranging from trade services such as guarantees, Letters of Credit, the more basic fundamental trade finance products as well as Supply Chain Finance, Export Credit Agency and any form of finance which needs to support a customer in any of their cross border trade. 

Great. So what are the key trends for trade in 2019? 

So this is a very broad topic in terms of key trends for trade. I’d say there are three: first is the threat of an escalation in the global trade war. I have to say in terms of the challenge that America is having with China and the threat of tariffs, which are potentially going to grow and rise. And the challenge there that has a knock-on effect. And I think at the same time as we’ve got a soft global slowdown in economic growth, we’ve got a threat that crosses border tariffs, and an increase in protectionism has a serious effect on trade and causes a global slowdown in trade.

Now, in general, what we’ve seen in recent decades is that trade has accelerated beyond global GDP growth. We’ve seen that slowdown. And that’s quite a treat because we see countries turn inward. That can be quite a challenge in terms of development within individual economies. I think that’s, it’s definitely a big trend of what we’re going to be talking about at this conference.

But generally, what corporates are worried about in terms of how they can find new export markets. Yeah, when, you know, the challenge of protectionism is rearing its head. I guess the second is Brexit, the B-word, particularly in Western Europe and the UK. And that again is linked to the challenge around tariffs and the imposition of protectionism and measures that actually restrict global trade and cross border trade rather than encourage free trade. A huge number of corporates and banks are focusing a lot of their time and attention in preparing for Brexit preparing for what might happen in the future. Obviously, we’re getting quite close to that deadline and it’s taking a lot of time and effort to actually work out how corporates can deal with that and deal with a challenge particularly for no-deal Brexit, which could be a substantial risk. I guess the third thing is digitalization.

At the same time as we’ve got challenges, we’ve got opportunities. So traders digitising fast at the same time as we’re seeing, not just trade digitising the end to end process of trade between corporates is digitising, we’re seeing trade finance going through quite a revolution at the moment, of how banks are helping their clients interact with them to make the process of obtaining trade finance much quicker and easier. 

Okay, so we’ve seen regulation really change and have potentially unintended consequences for SMEs looking to access to trade and receivables finance. What’s your perspective from the bank and what is NatWest doing to help SMEs access trade and receivables finance? 

I think you’re right there is definitely – can be an unintended consequence of regulation. I think the regulatory environment – the aim of the regulatory environment, particularly in relation to SMEs is to make it easy and simple for SMEs to access finance and also fair, so they want them to have a level playing field. And so I think, credit the regulator’s with that.

The aim is to also create a more benign regulatory environment for new startups for FinTechs and for challenger banks to be able to set up and challenge some of the incumbents which is, I think it is a good thing because it, you know, the more competitors there are in the market, it makes us all up our game and improve what we are offering to customers and particularly to SMEs.

I think that the challenge with SMEs generally is access to finance, particularly access to cross border into trade finance. SMEs, about 99% of SMEs don’t trade actively trade cross border. So the challenge is actually getting the expertise and getting the track record of trading cross border to then be able to access trade finance easily. So a lot of large corporates have been doing it for many years. They have established processes established teams established relationships with banks to be able to achieve that – for SMEs, it can be much more challenging. However, what I am seeing is the banks working much more closely, particularly with UK Export Finance, and particularly when it comes to cross border and trade finance to make it easier for SMEs to access trade finance in markets where it may have been perceived as too risky in the past. So I think banks are becoming much more open to having conversations with SMEs to support them in their cross border trade.

Want to find out more about digital trends in the alternative and receivables finance? TFG has partnered up with BCR at both their Alternative & Receivables Finance Forum and Masterclass in November.