International Trade

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SMEs are tackling the trade deficit but need to move out of export “comfort zone”

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The report of 1,000 company directors found that the average SME exports £553,000 a year to Europe, while it imports £535,000 – an average net surplus of around £18,000 for those small businesses exporting to Europe.

The average SME exports £714,000 a year outside of Europe, while it imports £410,000, working out as an average net benefit of around £304,000 for those exporting globally.

The UK’s widening trade deficit has been a topic of concern for many – and had been pointed to as a key challenge for the incoming government ahead of the general election. For the first three months of 2015, the trade deficit increased by £1.5bn to £7.5bn. This was due to weaker goods exports to the EU, as oil exports to places such as the Netherlands fell.

Vicki Redwood, chief UK economist at Capital Economics, said that the survey measures of export orders did not “paint a particularly encouraging picture of the near-term outlook for exports”. She added that the “weak eurozone and strength of the pound are likely to hamper the UK’s export outlook for the foreseeable future”.

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The FedEx report suggested that there was some positivity when it came to exporting, with SMEs being the bearers of good news – over half currently export and 72 per cent feel their international revenues will increase in five years.

Trevor Hoyle, vice president, Northern Europe operations, FedEx Express, said: “The report shows that SMEs recognise how lucrative exporting can be for their business and as a result more are going global, actively helping to reduce the deficit.”

The research reflected that exporting SMEs had “gone from strength to strength”, with the number of those exporting at least 20 shipments to Europe each month rising from 40 per cent in 2014 to 69 per cent. Similarly, while 43 per cent of SMEs exported more than £5,000 per month on average within Europe last year, this rose to 64 per cent.

Hoyle also said there was an improved mentality among small businesses looking to develop business. “The SMEs we help to go global are talking to us with a real sense of positivity and they understand there’s a whole world of customers out there to tap into.”

However, the report did flag up ongoing concerns among SMEs that not enough support was being given in helping them get a foot on the exporting ladder. Some 58 per cent said they could do with more support efforts to go global, whether that’s from the government, trade bodies or logistics providers.

The US, Australia, China, India and Canada were ranked as the most challenging global markets to enter for SMEs. Elsewhere, 20 per cent felt that reaching new markets was “critical to success”, with FedEx suggesting many feel unconvinced about the opportunities others are enjoying.

Hoyle said that exporting out of Europe can be “even more lucrative”, but many businesses “are yet to realise this, or are still reluctant to go too far out of their comfort zone”.

“These are the markets of the future and those who act now stand to make the biggest gains,” he advised. FedEx’s report indicated that the majority of SMEs still tend to export to English-speaking countries or the closest localities. Some 96 per cent of UK SMEs which do export, do so within Europe. Respondents agreed that the most significant barriers to exporting were costs, losing out on currency exchange, concern about payment, not having a physical presence and language barriers. 

Image: Shutterstock

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