British Companies in China Don’t Fret Over Brexit, Just the Trade War

* The first ever British Chamber of Commerce in China sentiment survey found two-thirds of the 212 respondents were optimistic about their prospects over the next two years

*However 52.2% said that the trade war has been having a negative impact on their operations, with the worst hit being those in the hospitality, tourism and sports segment

(Beijing) — Even with Brexit negotiations increasingly resembling a Christmas pantomime at home, British businesses operating in China are losing more sleep over the U.S.-China trade war biting into their bottom lines, a survey has found.

The British Chamber of Commerce in China (BritCham) launched its first ever sentiment survey on Tuesday, with responses from 212 British businesses with combined revenues of $3.8 billion on the Chinese mainland. Two-thirds of respondents were enthusiastic about their China prospects over the next two years, despite the clouds growing over the global economy.

Yet while many U.K. businesses fret about being frog-marched toward the chasm of a potential no-deal withdrawal from the European Union on March 29, British businesses in China are more concerned about the ongoing China-U.S. trade war.

Of the participants, 52.2% said that the trade war has been having a negative impact on their operations in China. Worst affected are companies in the hospitality, tourism and sports segment, where 81.8% reported a negative impact, followed by health care (70%), and manufacturing and logistic companies (67.9%).

Over a fifth of companies reported a drop in demand for goods and services related to the trade war. While two-thirds of businesses said that they intended to increase their investment in China over the next two years, 13.5% of goods related-businesses said they would be willing to move their production capacity out of China if tariffs increased.

In comparison, respondents largely kept a stiff upper lip about Brexit, with more than half saying that they expected withdrawal from the EU to have no impact on their China operations.

The results “reflect wider concerns about the indirect effect trade tensions could have on market sentiment in China,” said Nicholas Holt, the chamber’s chairman. “A lot of the tourism and hospitality sector involves inbound tourism to China, and the trade war brings general market uncertainty and decreased consumer confidence,” added chamber representative Anika Patel.

The concern over the trade war mirrors the views of U.S. businesses surveyed by the American Chamber of Commerce in Shanghai. Its survey in July found that over two-thirds of respondents viewed the Trump administration’s tariffs negatively.

The BritCham survey also found grievances similar to those of the U.S. and EU chambers, with cybersecurity and technology restrictions the main gripes of businesses, followed by a lack of intellectual property rights and protections.

Despite both countries announcing a “golden era” in relations in 2015, U.K. exports to China remain relatively low in value, at 22.3 billion pounds ($28.35 billion) last year, according to a report by the U.K. House of Commons. Chinese trade with the U.K. was worth 25.5 billion pounds.

Contact reporter David Kirton (davidkirton@caixin.com)