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Businesses are concerned about the cost of rising protectionism, yet are optimistic about their international business prospects, according to a new report from HSBC, ‘Navigator: Now, next and how for business.’

Of the 6,000 firms surveyed globally, three in five (61%) think governments are becoming more protective of their domestic economies. This sentiment is strongest among companies in MENA (70%), and Asia-Pacific (68%). In the USA, 61% believe protectionism is on the rise, while in Europe, half (50%) are seeing a rise in protectionist tendencies.

The majority of firms are looking to regional partners to develop trade opportunities, with almost three quarters (74%) of overseas trade in Europe and Asia-Pacific being conducted within their ‘home’ region. This trend is set to continue with regional ties being prioritised in firms’ expansion plans for the next three to five years. Focussing on the impact of government policies, those designed to strengthen regional ties such as China’s ‘Belt and Road Initiative’ (40%) and ASEAN’s 2025 strategy (37%) were cited most frequently as having a positive impact on international business.

Firms are focused on growth, with more than three in four (77%) businesses optimistic about their international business prospects, and expect the volume of trade to increase over the next 12 months. Reasons behind this confidence include an increase in demand for their products from consumers and businesses (33%), favourable economic conditions (31%) and the greater use of technology (22%) in driving growth.

Noel Quinn, Chief Executive, Global Commercial Banking, HSBC, said: “Overall, companies are showing remarkable agility in navigating the changing trade policy landscape. They are getting on with adapting business plans, and relationships, to participate in shifting supply chains. Strategies include increasing regional trade, establishing joint ventures or local subsidiaries in more markets, and capitalising on trends in consumer demands and digital technologies.

“An increase in protectionist sentiment hasn’t hampered the optimism of firms globally, but is causing concern about the cost of doing cross-border trade and international business.

“By taking time to understand the emerging drivers and impediments to trade, business leaders can identify risks and opportunities, and make informed decisions for future growth.”

Economic analysis supports the strength of business confidence, pointing to a 7% growth for trade values in 2018 (goods and services combined). Forecasts by Oxford Economics on behalf of HSBC show the economic indicators underpinning this estimate include an upturn in both investment and consumer demand, a weaker US dollar and recovery in the Eurozone.

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