All The Things You Wish You Knew About UK SME Exporting

Yann Gindre
Posted by Yann Gindre
Posted on November 09, 2018 Leave a comment

UK SMEs have always displayed both desire and overall confidence to trade abroad with both their European neighbours and also internationally. To establish a business with a global reach is central to the vision of many UK business owners when first conceiving of their product or offering and tends to be usually the next step of progression when considering increasing revenue streams.

Yet, for years expansion of SMEs has been held back by lack of financing plans, export readiness and an understanding of the competition faced in target countries.

While there are many external factors that are currently leaving the current economic landscape in uncertainty, 2 facts still remain certain:

  • Brexit or no Brexit, EU remains the biggest export region for the UK with £274Bn exported in 2017.
  • Trump or no Trump, US is the biggest single export market for the UK with £112Bn exported in 2017 (refer to graph below.)

New edited graph Yann's blogSource: House of Commons Library, 11/2018 

UK Main Export Partners 2017

UK exports to the EU have reduced to 45% of the total. In 2017, UK exported £274Bn to the EU (45% of all UK exports) while exporting £342Bn to non-EU countries (55% of all UK exports). This is shown below with ‘blue’ representing ‘other-EU countries’ and ‘red’ representing ‘non-EU’ countries.

EU vs Non-EU croppedSource: ONS balance of payments datasets "Exports: European Union" (L7D7) and "Exports: Total Trade in Goods & Services" (KTMW), 11/2018

 Opportunities for UK SMEs

There are many benefits to be gained from international trading, with increase revenues and bigger client base being among the top. However, according to a CEBR research, less than a fifth of UK SMEs export. This compares with over 40% of large businesses, leaving a £141Bn export shortfall in the UK economy.

Surprisingly, only 5% of UK SMEs have plans to start exporting in the next 5 years. It is important to note: UK SMEs who do export generate on average over £287K additional revenue annually from those exports.

UK SMEs that export have benefited with:

  • Improved profile and credibility
  • Innovation fostering
  • Exposure to new ideas leading to improved quality of the products or services they are offering.

It is an exciting time for business owners and to make the most out of this business owners have to do these  key things among others:

  • Realising that the “Great Britain" branding has value abroad that can and should be leveraged.
  • The development of digital tools is helping to reach customers, market info and opportunities quicker, easier and more economically
  • The UK Government promotes initiatives to develop and support UK exports

With this in mind, SMEs now should ask themselves what main hurdles they need to overcome when exporting.

 Key obstacles/ barriers UK SMEs need to plan for

With the vote to leave the EU, it is now immensely important for the government to provide support and incentives for SMEs to export their business. As already noted, trade finance is full of opportunities but also carries challenges and risk, among which:

  • Foreign Exchange ("F/X"): The first hurdle
    • Weakening of the £ versus € and /or $ will make the export more attractive to the buyers but could impact the UK exporter should it need to import inputs for its products.  
    • Strengthening of the £ versus € and/or $ will make the exports less attractive to the buyers but could benefit the UK exporter should it need to import components for its products.
  • Cash management:
    • Late payments from UK are difficult to chase but late payments from abroad can be trickier, which requires for the UK exporter solid cash management tools to minimise these risks.
  • Your product's compliance:
    • The result of Brexit will be key for the compliance of your product to the EU
    • Make sure you understand and comply with the regulations and standards of your export country

With this in mind, there are many potential solutions to address the risks:

  • F/X tools such as a forward contract, which will allow you to fix the currency level for a future delivery. You might still get it wrong as you need to take a forward view on the future currency level.
  • Multi-currency accounts which, besides being easier, will allow you to match expenses and revenues in the same currency
  • Akoni's export planner, including access to trade finance.  You can find out more by visiting akoni hub directly
  • UK Export finance insurance policies and traditional insurance providers
  • Government agencies support
  • UKTI’s Passport to Export Service assesses a company’s readiness for international business, and helps it build international trade capability.

At the current level the UK export market still not working towards its fullest potential, but with the pressure of a UK independent from the EU and promises of trade agreements with the Trans Pacific Partnership and other emerging markets, the future seems bright for UK SMEs, as long as business owners make the most of the tools and innovations available to them.

To find out more about check out Akoni's free SME export planner to plan your business foreign trade plan today!

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