New international trade survey reveals widening gap divides UK exporters

Fri 7 Jun 2013
Posted by: International Trade News
Trade News
An International Trade Survey, commissioned by The Institute of Export (IOE) and conducted by Trade and Export Finance (TAEFL) Ltd, highlights a growing divide between corporates and smaller UK businesses in the drive to enter overseas markets.

Lack of experience, finance and government support as well as ambivalence about Europe are constraining factors for micro, small and medium sized businesses to trade internationally, reports the survey, an annual barometer of Britain’s export industry since 1996.

The survey, sponsored by global insurance company American International Group, Inc (AIG), canvassed the views of 1600 businesses that trade internationally.

More than 53% of respondents were from the manufacturing and engineering sectors. Their feedback points to a growing divide between companies with a turnover of up to £25m and larger enterprises with a turnover in excess of £25m. With Europe still seen as the UK’s main export market, fewer than 50% of exporters believe that continued membership of the EU is critical for their business. Smaller companies were evenly divided on support for the UK’s withdrawal or continued membership on altered terms; however, those with a turnover above £25m – the group that has most to lose from withdrawal – believe continued membership of the EU is critical for their business.

This year’s survey incorporates the annual AIG Export Confidence Index which reveals a drop in business confidence to 58.5 from the previous findings of 71.2. Despite a fall in business confidence from 2012, three out of five companies remain optimistic of export business growth in the next five years.

Whilst nearly one in four respondents showed an encouraging awareness of Government schemes provided by UK Trade and Investment (UKTI) through Chamber of Commerce offices and UK Export Finance (UKEF), those with a turnover above £25m are making the greatest use of the support on offer.

A lack of experience and confidence in the export process is the single most constraining factor for companies entering overseas markets. The survey found two out of three companies funding an export drive are using their own funds and accumulated reserves, rather than approach the banks.

Mark Runiewicz, CEO of TAEFL, says that the findings highlight the critical factors that are holding back smaller businesses from growing through exporting: “It is disappointing that there has not been more growth in financing exports, despite greater awareness of UKEF’s schemes which are designed to provide guarantees to banks. Exporters remain reliant on banks in order to make use of the Government’s schemes so they can drive the UK’s export initiative.

“Larger companies report they have sufficient funds for their business but smaller companies are less confident. It is apparent that some are concerned they will be perceived as having cash flow problems or that the banks will increase interest rates and fees on export.”

With exporters’ lack of experience flagged as a significant constraining factor for companies entering overseas markets, our Director General, Lesley Batchelor, is calling for businesses to take advantage of the plethora of knowledge and skills’ training on offer.

“The majority of companies surveyed do not train staff in international trade and less than one in three small companies see a specific need for training. Yet this lack of knowledge and training is holding back export momentum, especially for SMEs. Much more needs to be done to make these companies aware of the training programmes, apprenticeship and finance schemes available. The IOE is the only professional body in the UK offering recognised, formal qualifications in International Trade and we know from our graduates that success and competitive advantage in global markets has to be rooted in sound knowledge.”

In another key finding many companies reported overseas buyers are placing orders with them based on previous experience of UK reliability and skills, even when some of the goods are sourced overseas.

Despite global economic conditions and the volatility of foreign exchange markets, over 50% of companies above £1m turnover a year have responded to the demand for UK products by putting an export strategy in place, a rise on previous years.

Outside Europe, the key export markets for UK businesses are: Asia, China, the Middle East Eurasia and North America.

The annual survey builds up a clear picture of the UK’s export market which is then used by Government, the Bank of England and other UK policy makers to help shape and influence future government policy.