In recent years, Czech two way trade with the United Kingdom has advanced by leaps and bound. The country was already the fourth biggest Czech trade partner two years ago in 2015, following first placed Germany, Slovakia, and just trailing Poland in third place. But the current trading environment for Czechs in Britain is a tough one.
One of the major factors contributing to that is the sharp drop in the level of the British pound against the crown, which in many cases has made Czech exports at least a quarter more expensive than they were before the announcement of the Brexit referendum result in mid- 2016.
And that, as well as the uncertainty of Brexit itself and sluggish British economic growth, has presented something of a challenge over the last year to the Czech state agency for boosting exports and local business, CzechTrade.
Martin Macourek, is head of the CzechTrade office in London and was in Prague recently to outline how they are trying to boost Czech business in a challenging environment. He said that in spite of the problems, Czech exports are looking to be on a general par with those of 2016:
"I would say not really surprisingly at the moment it has not really translated into a slump. It has not happened. The figures are still looking very good actually. Czech exports were 200 billion crowns in 2016 and are looking about the same for 2017. And the same applies for British exports to the Czech Republic. There certainly is uncertainty. We are seeing this quite clearly. Some companies are being quite wary. Some companies are saying to me ‘Martin, let’s wait a bit. We probably will cooperate. We must be do some business, we can’t stop doing business.’ In this sense, the British are quite pragmatic. They are, at the end of the day, awaiting a good and positive result of the Brexit negotiations despite all the political problems."
The drop in the level of the pound is clearly an issue though and Czech businesses with relatively high turnover and low margins will probably have had the most difficulty dealing with that long term problem. Mr Macourek again:
"Czech exports were 200 billion crowns in 2016 and are looking about the same for 2017."
"What could be a problem is really the slump in the pound. In certain imports, for example beers, we are counting every penny. So obviously, the distribution business is counting and we have just to have lower profit margins if we want to have the same big figures. That’s it."
But addressing problems can help you to move on. And the bane of Brexit has encouraged CzechTrade and some Czech companies to seek out opportunities at the higher end of the market where the biggest factor is not volume but the quality of skills and know-how being brought to the table:
"If we are talking about companies that are cooperating with CzechTrade, we do have genuine success stories in the fields where costs is not the major concern, where technologies and innovation are involved. That is what our office abroad is trying to achieve. We are trying to concentrate on more higher value production connected with technologies. So I would say, for example, the case of composite materials to aerospace industries. We have been supplying technology to the project for flying cars that is being mainly managed from Britain. Or for high precision cables and harnesses for BAE Systems which are being done by the Czech company Frentech Aerospace. These are genuine success stories.
And one area where Czech business in the booming local auto sector is looking to develop is with regard to the new Jaguar Land Rover factory that is being built in neighbouring Slovakia. The Czechs lost out in the original bid to land the factory itself but the opportunities on offer for other work exceeds the capacity of local Slovak companies and that’s where the Czechs believe they can step in.
"The cooperation with JLR started already in 2015, so we are already supplying the UK plants. But with Slovakia we are looking with supplying not only production but also non-production. That means assembly lines, paint shops for example, but also tools – hand tools and power tools. So it’s a complex cooperation. I think at the moment these guys at JLR have understood we are good at technologies as well. We are looking at helping them replace materials. How could we achieve better economies of scale if we replace steel with aluminium or if we replace aluminium with composite materials and vice versa. This is the engineering side.
"We are trying to concentrate on more higher value production connected with technologies."
"We are also looking to organise together with our partners from Austria a technology forum for JLR in terms of companies that could supply software and hardware solutions to drive the evolution of autonomous cars but also in general with artificial technology. So that’s looking quite exciting actually and it’s much more than components only."
In the beer market, CzechTrade’s skills are probably superfluous for multinationals with a foothold already in the market.
"Czech exports in beer are doing very well, very well actually. To be specific, it’s 200,000 hectolitres per year. But if you look who is responsible, you would find that this would be the big guys: Pilsner Urquel, Staropramen, Budvar, Krušovice. Obviously, these guys, with the exception of Budvar, they are all part of multinationals, so they are being pushed by the mother companies, such as Molson Coors, AB INBev, Heineken, Carlsberg."
But that’s not the case with smaller breweries trying to make an impact for the first time. And that, according to Martin Macourek, is where the local office CzechTrade office can and has been making a difference.
"What we are trying to do is to join the smaller guys, the craft breweries, to the party. At the moment we managed to introduce four new breweries to the U.K. on-trade and off-trade market. A good example would be Primator which is now selling its wheat beer. We managed to convince a British distribution company called Pivovar Ltd, because they specialise in importing Czech and German beer, to import the Czech wheat beer. These guys found out that the Czech wheat beer is better than the German. Obviously, the German is more famous but the Czech has a better quality and technology and is even a bit cheaper. So it does make sense."
And the promotion of smaller Czech breweries and beers also applies to the Republic of Ireland. And a hit there has been the lager produced at the Herold brewery near Příbram in Central Bohemia.
"What we are trying to do is to join the smaller guys, the craft breweries, to the party."
"We managed to introduce Herold to Mr. O’ Hara, who is the owner of the O’Hara’s Brewery, a family brewery and a major brewer in Ireland with a number of own owned pubs that are managed by the O’ Hara family. We initially started talking with Mr. O’ Hara about helping with bottling Herold beer. But finally Mr. O’ Hara told us after testing the beer that ‘I have never experienced such a good lager. It’s so bready, so full of flavour. It’s such a difference with the likes of Heineken and other brands on the Irish market.’ He told us: ‘You know what guys, you are right. I will put this beer and add it to my portfolio and it will be my own Herold lager.’ It’s a great success story and we are so really positive about this success. And we want to build on it. We are trying now to speak with UK and Irish breweries to do the same. At the moment we are speaking with the biggest London brewer, Fullers, t add a Czech beer to their portfolio. Well, actually, a second beer to their portfolio because they already have one, which is the Moravian brewery Litovel."