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Boosting UK exports: helping businesses expand overseas
The UK government aims to help businesses export £1 trillion of goods and services by 2020. This is a challenging goal, but well worth striving for: increasing exports will support growth across the UK, and have significant benefits for the companies involved.
Research by Santander2 suggests that an exporting company is four times less likely to default on loans, and 48 per cent of companies who trade internationally report significant increases in return on investment on their products and services.
Small and medium-sized enterprises (SMEs) make up the vast majority of British business, and just over four in five of them do not export at all. Improving SME exports by even a relatively small amount could have a significant impact on the UK’s trade balance. In 2012 David Cameron noted that if the proportion of SME exporters increased from just under 20 per cent to 25 per cent it could add £30bn to the UK economy.
Yet even a relatively small shift will require dedicated work and creative thinking from SMEs and their partners in government and the private sector.
Key areas of barriers and recommendations
Access to finance:
It is vital that businesses have access to finance, and are able to choose the most appropriate solution from a range of different options. For companies looking to export in particular, it is important that trade finance products are available, irrespective of the sector the business operates in or the foreign market it is targeting.
UK government schemes also play an important role in helping the financial services sector finance the risk of exporting. UK Export Finance (UKEF) is a good example of how the government can support trade.
To ensure that UKEF continues to provide efficient support, further simplification of its products should be sought, as well as increasing the investment in “front line” personnel.
Government and private sector partners should consider how they can engage with and support small and medium-sized businesses to develop into international markets, including raising the awareness of services available through UK Trade and Investment (UKTI), Scottish Development International (SDI), Chambers of Commerce, banks and other trade bodies.
Facilitating connections between businesses with export ambitions and those already exporting is an effective way to share knowledge and advice.
More should be done to connect businesses with services providers in their new market, such as marketing services, lawyers and accountants. Businesses will require a network of third parties in each new market.
Since visits to potential markets are a good way to gather knowledge and build connections, the UK government should ensure that domestic and international travel remains as simple and cost effective as possible for businesses.
The private sector should also continue running virtual trade missions for SMEs to facilitate introductions to potential overseas partners without incurring high costs.
More information should be provided on the preparation needed before a business can export. For example, certain products may need to be adapted for various markets due to differing regulation.
More should be done – whether through business associations, larger partners or directly – to link universities with SMEs so that companies can tap into the resource provided by international students.
The skills of foreign students or those studying international business should be used to support UK businesses pursuing their exporting ambitions.
The promotion of apprenticeships as an alternative route to higher education is welcome. The apprenticeships framework should enable SMEs to access this talent pool, whilst promoting the opportunities that SMEs in turn can offer to ambitious individuals.
On the ground support:
UKTI’s continued support for exporting businesses is welcome. The organisation should continue to work closely with partners in the private sector to ensure its trade missions and international network are as effective as possible.
The recruitment of trade advisors with previous experience in export activities should be encouraged. It should be considered how these advisors might be used in a cross-regional or cross-sector way so that there is a more consistent level of advice for SME exporters.
The availability of trade missions should be properly communicated to SMEs, including advice to companies on how to maximise value from them. Improved information would also increase the uptake of these opportunities by SMEs.
However, alternatives to trade missions should also be communicated. A virtual trade mission can help a business to prepare for and gain knowledge of a new market before visiting it.
More support should be provided to businesses from those who are already exporting, through masterclasses, roundtables or virtual trade missions.
UKTI, Chambers of Commerce and other private sector partners should consider the best way to provide practical advice on regulatory and tax systems to reduce the costs of launching in a new market.
Embassies should share local opportunities for UK businesses and promote them within the UK.
Local Enterprise Partnerships (LEPs) should be used in the development of strategy and planning to focus on exports. This should be considered as part of the local ecosystem to develop and execute export strategy.
The UK government’s ambition to position London as a global hub for the FinTech industry is welcome. Efforts should also be deployed in promoting the FinTech industry more broadly across the UK.
Government and regulators should continue to work closely to ensure that policy developments in this field are coordinated and make the most of potential synergies. It is important that the banking industry, the FinTech community, and consumer and industry groups continue to be involved in this process.
The opportunity for both FinTech companies and banks lies in the ability to collaborate. FinTech companies bring agility, the technological skills and a disruptive mind set. Banks have the existing industry expertise, customer base and a robust architecture needed to provide scale. Together, the partnership can make a powerful impact on the customer experience.
What are the greatest challenges you face when trying to develop into new markets?
Realising the benefits
Survey results show that 33 per cent of SMEs gained a new customer, supplier or distributor within three to six months of their return to the UK while 16 per cent recorded significant results within a year.
Below are examples of companies that have benefitted from a Santander trade mission.
1) PVL UK Ltd, a specialist in providing marking kits and vehicle graphics to the emergency services and major highways contractors and operators, attended a Santander trade mission to Abu Dhabi and Dubai in September 2014. This culminated in a £100,000 contract, and the more recent signing of a major agency agreement with another group, with which it first made contact during the trip. Since then, Nick Broom, managing director, has decided to move to the UAE to focus on new growth opportunities in this region.
On the mission, I suddenly realised that I needed to really take advantage of the opportunities in front of me: an emerging and growing market seeking UK innovation and expertise, great contacts and an opportunity that could spread beyond the products and services we offer in the UK, potentially to a Gulf-wide audience,” explains Broom. “As a result, I am now planning to move my family out to the UAE to focus on the growth of the business here within the next 12 months.
2) Yorkshire-based Top Screen Media, a digital innovation company specialising in customer engagement technologies, participated in a Santander trade mission to New York in 2014. During the visit, the company met with the CEO of the New York Port Authority, which runs the transport infrastructure in New York and New Jersey. This resulted in the company winning contracts for both the transport system and a major retail development at the World Trade Centre.
As a digital technology business, based in Yorkshire, it is easy to think that this level of technology advancement may be better in the US market but the trade mission taught us that this was not the case and has given us a lot of confidence,
says CEO Achille Traore.
The World Trade Centre is a very high-profile development, and New York is considered one of the hardest markets to break into. If you can do business there you can do it anywhere in the world.
3) Budge Brands (Premier Estates Wines) is a £30m-turnover business based in the Midlands, which has received funding from Santander to build a local distribution plant. The company joined the USA Trade Mission in November 2015, and signed a distribution deal to take its branded wines to market in the US, and will participate in two trade shows there in the spring of 2016 to promote the brands’ US launch.
Santander International Business Unit, Chile Q3 2013