Gary Griffiths – Managing Director, Trade Finance at Bibby Financial Services
Last month the Government introduced The Small Deals Initiative and The General Export Facility to support small UK exporters and importers. It’s a welcome move, and exactly the sort of assurance that many across the UK need, but there is more that could be done.
I was concerned to see very few UK importers have applied for the Transitional Simplified Procedures scheme. This initiative through HMRC is designed to ease imports in the event of the UK leaving the customs union and single market under a no deal Brexit scenario.
A lack of awareness of the scheme is of concern when businesses still face an uncertain outlook. The risk of a no deal Brexit still looms large and businesses may have to adapt very quickly to a very different reality than they’re currently used to.
To respond to this challenging environment, SMEs need to rethink how they approach their operations and refocus on building efficiencies and profitability. This may sound like back to basics but getting the right structures in place will provide businesses with the confidence they need to be ambitious. Too often, I see importers and exporters needing support, but not getting it. Therefore, it is good to see the Government taking a greater role with measures to help SMEs stay ahead of these uncertain times.
Exporters are a vital part of the UK economy. According to our research, 29% of UK SMEs export to foreign markets, amounting to roughly 1.1 million businesses in total, underlining the importance of smooth trading relationships.
British businesses also play an important role in global supply chains. The Department for International Trade own data shows that the number of SMEs exporting increased by 6.6% in 2018.
A helping hand
Several measures have been announced by the Department of International Trade which are designed to help firms trade more effectively. These are:
The Small Deals Initiative, which sees UKEF guaranteeing the loans of potential overseas buyers of British goods. This will safeguard the attempts made by UK SMEs to broaden their horizons to make UK bids more competitive.
By doing this UKEF helps addresses the cashflow and confidence problem, but it is the General Export Facility we’re most excited about.
The General Export Facility (GEF) allows UKEF to support exporters’ overall working capital requirements, rather than requiring support to be linked to the needs of a specific export. So often, government policies are tied to specific criteria, but the GEF takes a more holistic view. It is aimed at supporting businesses when they need it.
Additionally, a range of finance will be made available to support firms in the supply chains of UK exporters.
In my experience SMEs that make the most use of support make the most success of their businesses. We are in constant communication with those on the frontline of importing and exporting; discussing their opportunities, their challenges and their achievements. Along the way, we’ve learned a lot about what it takes to turn import and export opportunities into profitable growth.
Brexit or otherwise, it is prudent for SMEs to reassess strategies that prioritise resilience. The exporters we speak with are currently looking to cut their costs and grow. To do this they are looking more closely at the opportunities in the countries where they already operate, as well as expanding into new markets.
For our part, we have recently announced a partnership with the Institute of Export and International Trade help our customers and their members to better understand the risks and opportunities that are available to them. Businesses need to be taking steps to mitigate the risk of a fluctuating pound cutting into their overseas international profits and affecting their international supply chain competitiveness.
The UK government has indicated that it remains open for business, SMEs must also signal similar intent regardless of the uncertainty that lies ahead.
A land of opportunity
Whilst there is no silver bullet to solve the uncertainty, when it comes to exports, public and government support is welcomed. Over a third (36%) of SMEs told us in our SME Confidence Tracker in Q1 that they wanted the Government to secure more trade deals, and it is important the needs and requirements of SMEs are recognised in ongoing and future negotiations.
The good news is that the latest measures are a watershed moment for SMEs – since it is the first time a financing package of this kind has been made available to businesses exporting to fast-growing emerging markets. This, along with the recent trade deal with South Korea, marks promising steps in the post-Brexit trading landscape but, as always, we cannot afford to stand still.