As business advisors, it’s our responsibility to keep our clients informed on any situation that may have a financial impact on your business. The ongoing conflict in Ukraine will have a ripple effect on many businesses, whether or not you import and export.
What are the financial sanctions imposed on Russia and how could they impact my business?
On 22 February 2022, Russian armed forces invaded Ukraine and a series of financial sanctions were imposed by countries around the world in an effort to delay and penalise the actions of the Russian military. As the conflict continues, tougher sanctions have been enforced, and these, in addition to the impact on our usual trade with Ukraine, have had a knock-on effect, pushing up prices on fuel and energy, among other things, here in the UK.
What does the UK usually trade with Russia and Ukraine?
In general, trade between the UK and Ukraine to the year-end of Q2 2021 was £1.6bn in total. Four fifths of this in goods, with imports of:
- Iron and steel (about a quarter of all Ukrainian goods imports to the UK)
- Cereals and grains (22%)
- Vegetable oils and fats (15%)
- Oil-seeds/oleaginous fruits (14%)
- Animal feed (3%).
Key UK exports to Russia are machinery:
- Nuclear reactors, boilers ($743m in 2020)
- Vehicles ($504m in 2020)
- Pharmaceuticals ($293m)
- Electrical & electronic equipment ($153m)
How does it affect my business?
Businesses in the South Yorkshire region will inevitably be affected, not only from the supply chain movements for goods coming from Russia and Ukraine, but we must also consider our importing/exporting profiles from the Donetsk and Luhansk areas.
If you have raw material suppliers or customers in these regions you must be prepared for disruption and alter your expectations accordingly. It may be difficult to find alternative suppliers.
What further disruptions should we expect in the coming months?
We should also expect closure of airspace, which will have a significant impact on the movement of goods and people. Prices for certain raw materials and energy will increase. Russia is the second biggest exporter of crude oil and is also the world’s largest natural gas exporter. Since the news broke during the night, the price of oil has increased almost immediately, topping $105 a barrel.
The combined effect of increased gas and oil prices, disruption in supply chain movements, restrictions in supplies and tightening of cash flows will undoubtedly affect the flow of business with Europe, Ukraine and possibly the wider Eurasia Economic Union of which Armenia, Belarus, Kazakhstan, Kyrgyzstan are members along with Russia.
How might Russia react to the sanctions imposed on it by the UK?
With the introduction of economic sanctions, there is also potential for Russia to introduce higher tariffs or full sanctions on UK exports. This will be challenging for a number of South Yorkshire manufacturers whom we have worked with for several years, ensuring their goods destined for Ukraine and Russia arrive without issues. These combined exports amount to significant value.
If you’re concerned about how the ongoing conflict in Ukraine could affect your business, please don’t hesitate to get in touch. Our expert advisors will be able to put your mind at rest or help you to put a plan in place to tackle the challenges your business may face.