Mid-sized businesses reluctant to export, bank warns and are being too conservative in their export ambitions and are not considering key growth markets overseas even though they are aware of the benefits, new research from Lloyds Bank shows.
Three out of five firms (58%), with an annual turnover between £25m and £750m, said that they do not currently export and less than one in ten (7%) are looking to do so within the next five years, indicating that over half of mid-sized businesses are still cautious in considering their long-term export strategy.
The research comes as recent indicators have shown that firms are more bullish about the UK economy with business confidence reaching a 22 year high according to the Bank’s recent Business in Britain report in July.
According to the findings, just under a fifth (17%) of firms stated that selling overseas is one of their top three business objectives for the next twelve months. This contrasts with three out of five mid-sized firms (60%) that say increasing turnover is one of the main, followed by two fifths of firms (43%) who are focusing on growing their UK market.
Similarly a third of businesses are focusing on reducing their costs (38%) and a similar number increasing their productivity (34%). The figures were similar when respondents were asked for their objectives for the next ten years or the next twelve months.
This lack of focus on exports is despite businesses being aware of the benefits. Of those mid-sized businesses that export around three-quarters said that the main advantages of overseas trade were expanding their customer base (73%) and increasing sales and profit (77%).
Steve Harris, area director for Lloyds Bank Commercial Banking in North, East and West Yorkshire, said: “Although business confidence has reached a record high, mid-sized firms often appear to be overlook the benefits of exporting.
“The size of the international opportunity clearly depends on the nature of the sector. However it also reflects the fact that businesses are focusing their efforts on their UK operations first, looking to reduce their costs and increase productivity before embarking on global growth opportunities.”
Businesses listed a number of factors which they said prevented them in exporting to new markets including: not having the right contacts (21%); products not being suitable for overseas markets (20%); not understanding the legal and regulatory requirements (20%); not having the time and resources to investigate (20%); and volatility in exchange rates (17%). Firms were confident of attaining trade finance with only a fraction (5%) of firms citing access to finance as a barrier to exporting.
Of those mid-market businesses that do export, Europe is top with three in four firms (74%) citing the region as their primary export market, with North America second (13%) and Asia third (5%).
When asked which countries they expect to sell to over the next ten years, one in seven firms (14%) said China, however the next highest were the more established export markets of Germany (6%) and France (6%) close behind.
Only a proportion of UK exporters have taken logical steps to export with half of firms (50%) visiting potential clients to research their market, under a third (31%) undertaking market research and under a quarter (23%) building an export plan with their banks.
Just under half of UK exporters (46%) said that they found the Government’s UK Trade and Investment department (UKTI) very useful or helpful in reaching their aims while a similar number (43%) were not aware of the organisation, showing an opportunity for more awareness and education about the services on offer.
Harris added: “Although there is a great deal of interest in emerging economies, there is still a relatively low level of export activity to these regions. The picture is slowly changing, but too manyUK firms appear to be prioritising markets closer to home over the long term.
Comment from The South Yorkshire International Trade Centre
Developing exports is crucial for the UK economy in the short and long :term, everyone knows that. But it is also important for most SME’s operating in the UKat the moment. It is more than business development. It is understanding what is going on with your product or service in the global village and if you do not keep abreast of developments, one day a foreign company will come into your only market with a newer, better and possibly cheaper product to replace yours and you will not be able to do anything about it. Even one trip a year to a carefully selected International Trade fair will enable you to find your otherwise unknown competitors, you can see how they are developing the products and what the price point is.
As a county Yorkshire business have a lot of excellent help to develop international trade. The collective Yorkshire Chambers of Commerce all have experienced international traders to help, and South Yorkshire and the Sheffield City Region has SYITC, SYITF and UKTI.
Come and talk to us, it could be easier and cheaper than you think to start a long term export strategy.