Monday 31 July 2017 12:42 pm

Going global: Exporting isn’t the hassle British SMEs fear

The UK's decision to leave the EU has thrust the issue of international trade into the spotlight.

Currently, just one in five SMEs export, and a recent study by Lloyds Bank found that the EU was a trading partner for 85 per cent of exporters over the past year.

Pre-referendum, this relationship was easier, cheaper and tariff free compared to other non-EU countries, which is a massive boost when protecting the tight margins small businesses have to play with.

Worryingly, a new report from the Federation of Small Businesses found that 29 per cent of companies expected to export less after the UK-EU divorce.

This leaves a huge percentage of the UK’s SME sector more reliant on the domestic market, and with the economy likely to be unsettled for the foreseeable future, any small business contemplating growth really needs to think about factoring overseas markets into their growth strategy.

Going global is not just about diversification of customers, but also of suppliers and talent. Brexit has highlighted the need to be agile and resilient. In fact, an overseas footprint is fast becoming a key feature of a successful scaleup business.

For many small businesses, the thought of stepping outside of the UK to new markets equals more red tape and an added distraction when they just want to focus on being profitable. But in reality, the majority of SME businesses already import comfortably, and as daunting as it may seem, the process of exporting is just as easy.

Most first time exporters can be confused by where to start, but there are a number of organisations supporting small businesses to help them understand the potential of overseas markets.

The Department for International Trade is running its Exporting is GREAT campaign, and has been hosting roadshows across the UK to encourage more businesses to explore the opportunities. The private sector is also offering trade portals and connections to help match opportunities, leveraging their broad client base and international reach.

Organisations such London & Partners’ Mayor’s International Business Programme and Enterprise Nation run trade missions for small and scaleup businesses to various overseas markets, in the EU and beyond.

The aim is to help businesses to network with local partners and corporates that can help with their international growth plans. Disruptive technology businesses are particularly in demand overseas.

This year, KPMG has been involved with a number of trade missions, and the one constant is the strength of the British brand which opens doors and allows a premium.

There is a real desire from foreign businesses to trade with the UK, despite the uncertainty of how trade will work. They want to build relationships now, rather than wait until Brexit, and the success of the UK startup sector is recognised across the world.

In the digital age, geographical boundaries no longer prohibit a business from engaging with new markets. Instead of – or in addition to – the more traditional physical presence, businesses can expand through ecommerce platforms, or distributors and partners in country.

The rapid evolution of digital has given small enterprises the ability to compete with the bigger players on a global scale, although of course it’s still important to understand and build in capability to cater for the different behaviours and cultures across the new markets.

Now is the perfect time to start reviewing growth plans, particularly supply chains. Many small businesses may only ever have worked with the same suppliers in Europe for a number of years, but with a possible cliff edge departure from the EU, now is the time to look at what new suppliers further afield can offer.

On average, businesses that trade with the EU have a lower turnover than those who do business in China and North America, according to research by the FSB.

A study for American Express also found that nine in 10 SME exporters were doing well from the pound’s fall, increasing their profit margins by 16 per cent. Firms that both export and import were the most confident, with 95 per cent saying sterling’s slump had boosted business and increased profit margins.

While going global can be a complex task with ﬁnancial, tax, legal and cultural implications to consider, the rewards can be great. Becoming a more international company offers opportunities through a wider customer and supplier network. This can create a more resilient, valuable company – and one that can weather more storms.

Brexit has raised uncertainty around the new rules of the game (whether it is people, trade, regulation), and while that creates some malaise, the game is still on, and British companies can succeed.