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Trade credit: maximising opportunities presented from the CPTPP

The UK Government has announced plans to join a trade agreement with 11 different Asian and Pacific countries. Here’s why and how it might impact your business.

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By Ian Leslie , 

Sales & Business Development Leader, Trade Credit

31/05/2023 · 3-minute read

In early April 2023, the UK Government announced plans to join a trade agreement comprised of 11 different Asian and Pacific countries. Here’s why and how it might impact your business.

What trade pact has the UK joined?

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), originally established in 2018, facilitates freer trade with: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. This is a trade pact currently boasting US$13.5 billion of global GDP. 

UK organisations within the manufacturing, engineering, retail, and food and beverage sectors are set to be among those benefitting from this agreement, as tariffs have been reduced on cheese, cars, chocolate, gin, machinery, and whisky.  

These changes make businesses in the UK more competitive, particularly against international counterparts. This agreement may also help to offset the effects of the loss of access to the single market, to some degree.

UK firms are now provided with the opportunity to access markets they have previously been challenging to enter. It is crucial for many UK organisations to take advantage of this. Trade credit insurance is a tool that can help businesses capitalise on this. 

How can trade credit insurance benefit UK businesses?

Trade credit insurance can provide protection, information, and help liquidity sourcing for firms in the UK seeking to operate within the CPTPP bloc. In this instance, trade credit insurance – normally reserved for mitigating risk – can be used to create further opportunity. Export financing can be completed at better rates, providing a boost to UK businesses.

Business with fellow CPTPP nations – now possible on credit terms with trade credit insurance - will also be more securitised; providing assurance to insurers. Conventionally, trade credit agreements were installed to afford protection against the inherent payment and supply risks involved in international trade. However, trade credit agreements can also aid organisations attempting to source liquidity for commerce. Extra liquidity can help reduce the friction involved with transactions that may have previously required immediate cash payments. The ascension of the UK to the CPTPP bloc can also potentially yield better rates for UK organisations, holding trade credit insurance, looking to finance their receivables. 

Insurers will likely have lines within various CPTPP countries that can be leveraged to build trust and agreements between organisations looking to conduct trade. By accessing the plethora of extra information this trade bloc presents, companies can feel much more comfort in sourcing, exploring, and securing new international trade deals.

Next steps

The CPTPP agreement can provide businesses in the UK unparalleled opportunities to access both developed and emerging markets abroad. A sound trade credit insurance policy could help open the door to superior financing rates and additional capacity for capitalising on these opportunities. 

To find out more about our trade credit services, please contact your Marsh UK representative.

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