Originally published on Barclays Corporate Banking: Insight and Research on 9 April 2014
Chancellor George Osborne spoke the word “export” 28 times in his Budget speech last month, compared with only eight times in 2013.
His resounding message was: “we back businesses who invest and export”, and now he’s putting his money where his mouth is: by doubling the lending available to exporters to £3bn. So why does he care – and how can your business benefit?
“There’s clearly a political agenda to make sure we’re not overly dependent on the resurgence of consumer spending in the UK,” says Dan Roberts, managing director, Head of Trade & Working Capital, Corporate Banking, Barclays.
“While the recent recovery in UK economic growth has mainly been consumer demand driven, the government has made it clear that our future growth plans depend on international success through exporting.”
Exporting for growth
Businesses that export are generally more successful. Roberts cites a recent report from UK Trade & Investment (UKTI) titled ‘Bringing home the benefits’, which shows that exporters tend to “grow faster, increase their turnover, take a more innovative approach to product development, increase their profile and credibility, and create more jobs”.
Yet only around one in five UK SMEs trade internationally, compared to an average of one in four in the rest of the EU. Roberts admits there are risks that businesses new to exporting face – risks that could put them off – but explains that provided these risks are identified and understood, they can be managed and mitigated.
Identifying the right markets
Each overseas market offers unique opportunities and challenges, so it is important to undertake thorough research on potential markets and find the right fit for your business.
Simon Spinks is the managing director of Harrison Spinks, a luxury mattress and components manufacturer based in Leeds. “Everyone thinks of China and the US as the golden chalices for exporting,” says Spinks. “But depending on your product or service, different systems and laws can make it very difficult to get your product into these markets. That’s not to say there aren’t options – you just have to be innovative in your approach.”
For Spinks, US laws around products being flame-retardant meant he couldn’t export whole mattresses easily, so he initially began exporting spring components instead.
Supporting Harrison Spinks’ research into new markets were advisors from UKTI, which has 40 offices across the UK and 100 embassy teams globally. “We found UKTI extremely useful, but not enough businesses know about their services,” says Spinks. “It was actually our bank, Barclays, who were first to introduce us to them – and it was a crucial step for us.”
Exporting is about services too, not just goods
Many think of exporting as the preserve of manufacturers like Harrison Spinks, but exports aren’t only about goods. The UK’s world-leading service providers in financial services, media, healthcare, recruitment and education are enjoying a renewed focus from the trade minister, Lord Livingston, and the government at large.
“It is recognised that the UK has strong service industries,” says Roberts. “And alongside UKTI, Barclays is trying to focus on what further things can be done to help support the exporting of services as well as goods.”
There is help out there for businesses looking to export. So if you’re considering a move overseas, what can you expect, and how can you prepare?
Once new client bases have been found, payment terms and cashflow must be readdressed. “Trading internationally puts different pressures on the cashflow of a business,” explains Roberts. “Often the terms for international trade are different to what businesses are used to when trading domestically.”
As a company’s cross-border network grows, so too can the time between receiving payments from customers abroad and paying suppliers, which could slow further expansion.
Roberts outlines how your bank can support: “Implementing a working capital solution can help manage your supply chain more efficiently, ensuring you have the correct levels of stock to meet demand, but also to grow into new markets.”
Getting the right support
Of course, at the heart of all successful business strategies is strong planning and good advice, says Roberts. “Businesses should look to organisations like the British Chamber of Commerce, the CBI and the Institute of Export, but also within their own network. All businesses have accountants, and most accountants will have some experience of international trade. Banks can be another valuable source of assistance, with a presence and networks in multiple countries, alongside extensive international experience.”
The fact is there has never been a time when there was such a wealth of support for exporters at hand than today, and if the UK economy is to increase its financial health, it is the exporters that will deliver that and reap the rewards.