In addition, the EU is currently experiencing relatively slow economic growth whereas, elsewhere in the world, international trade demand for British goods and services is rising thanks to the weakness of the pound and the strength of Brand Britain.
The government is certainly banging its drum – the Australian prime minister has already talked openly of trade deals and officials from New Zealand, China and India have dropped hints about new agreements.
In light of this, it is unsurprising that new research has found small businesses are more upbeat about their international growth prospects than their domestic expansion. Some 48 per cent of the businesses interviewed by Western Union Business Solutions believe they will see growth in international trade activity compared to 39 per cent who are expecting a growth in domestic trade.
Adam Slater at Oxford Economics explores this further: “In the late 1990s, more than 60 per cent of UK goods exports went to the EU but this has fallen to around 45 per cent.” He believes this trend could mean that by 2050 exports to the single market could make up less than five per cent of Britain’s economy.
In the current climate, relying on the EU alone seems short-sighted particularly, when trade further afield offers such rich rewards. A recent report by Alibaba Group’s research firm AliResearch shows that global cross-border commerce is expanding at a rapid rate. Forecasts expect its value will hit the $1tn mark by 2020 – a figure that looks even more exceptional when considering global cross-border commerce was only $230m in 2014.
However, according to the Centre for Economics and Business Research (CEBR) consultancy UK SMEs are currently among the five worst performing countries in Europe when it comes to exporting and are seriously missing out on international trade.
The CEBR report found that less than a fifth of the UK’s SMEs were selling their goods and services overseas, compared with two-fifths of big businesses in the UK. It claimed that if more SMEs were helped to enter new markets for international trade and bring their export rate up to 40 per cent (more in line with larger businesses), it could be worth around £141.3bn a year in overseas sales.
The opportunity is vast but there are a plethora of reasons why SMEs may be hesitant. For example, overcoming the challenges posed by volatile foreign exchange rates, processing payment in a timely way, understanding alien tax regimes, language and cultural barriers can become a barrier to entry.
Unfortunately, few small businesses have the time or resource to spend hours chasing invoices or researching the different regulations across the world and even the thought of ensuring they are compliant can be off-putting.
Compliance is a moving target as governments are constantly changing the rules and each country or region tends to have its own set of criteria and it can be a real headache for SMEs to get their paperwork in place. This is where e-invoicing can transform a business’ experience of exporting.
On top of regulatory issues, companies that operate globally can also face increased risk of fraud. The more countries you operate in and the more complicated your payment process, then the more opportunity fraudsters have to target your business.
In addition, there are certain higher risk parts of the world where you need to be particularly alert and agile to understand the complexities of operating in that market and how to protect your business.
Using e-invoicing can help SMEs identify and eliminate invoice fraud as it shifts some of the responsibility for checking an invoice from your finance team to a highly sophisticated, automated-service provider that is expert in building business-specific rules which invoices are validated against.
Another significant challenge of trading overseas is paying invoices in different currencies. To tackle this, we recently teamed up with international money transfer platform Payoneer to enable businesses to receive cross border payments quickly, securely and at low cost – saving up to 90 per cent on bank transfers.
Through the platform, businesses can now receive bank transfers from their international customers as if they had a local bank account – meaning, if a customer pays in dollars, a supplier in the UK would receive payment in pounds, whereas a supplier in the Eurozone would receive payment in euros.
With all the instability surrounding the UK’s future in the EU, SMEs cannot afford to overlook the wider world. It might be easy to feel daunted about setting up appropriate back office systems for exporting but there is support available that can remove much of the friction and enable businesses to focus on things of first importance.
The world truly is your oyster if you seize the opportunities presented by our borderless world.
Billy Hayden is head of supplier enrolment at Tungsten Network