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British SME Export Growth Helps Tackle Trade Deficit

Executive summary

Last year, in the foreword to the first FedEx Great British Export Report, I said the future was looking bright for British SMEs, and that it was important for them to keep pushing forward towards sustained growth and stability. Twelve months later there is no denying they have done so, and more.

The findings of the second annual FedEx Great British Export Report clearly show that SMEs are exporting more than ever, both in terms of volume and value. At FedEx the SMEs we help to go global are brimming with optimism for the future, and for the opportunities they see abroad.

And rightly so: perhaps the most striking finding of the report is that, while the national trade gap is widening, exporting SMEs are actually working to counteract this. They are currently exporting more than they import and are therefore making a positive contribution – a remarkable feat. We could, it seems, all learn a thing or two from smaller businesses.

There is however still more to be done. While the top destinations for exports are in Europe and the English speaking world, British SMEs are starting to notice the potential that exists in the high-growth markets of Asia, Africa and Latin America. As the world becomes more connected, global trade lanes will strengthen, and exporting to these markets will be even easier and even faster. In the meantime, FedEx Express is perfectly placed to help businesses who want to be ahead of the game.

A year is a long time in business, but don’t be surprised to see SMEs’ exporting confidence continue to grow in the next 12 months. SMEs have become the shining lights of the UK economy, and it is up to all of us to give them the tools and access they need to succeed on the global stage.

Trevor Hoyle

Vice President Northern Europe Operations

FedEx Express

July 2015


KEY FINDINGS

The FedEx Great British Export Report 2015 by FedEx Express canvasses the current behaviour and opinions of over 1,000 small to medium sized enterprises across Great Britain. Here is an overview of the key findings:

Q. How are British SMEs making a positive contribution to tackling the trade deficit?

  • Currently, the financial value of exports exceeds that of imports for Britain’s SMEs. The average SME exports £553k a year to Europe and imports £535k, an average net surplus of c£18k for those SMEs exporting to European countries.
  • The average SME exports £714k a year outside of Europe but imports just £410k, an average net benefit of c£304k for those SMEs exporting globally.
  • 53% of British SMEs export, although the figure varies considerably by company size.

Q. Where do British SMEs export to?

  • 96% of British SMEs who export, export into Europe.
  • France is the number one export market for British SMEs – 57% of SMEs who export, export into France. Germany is the second biggest market (49%) followed by Spain (37%).
  • 73% of British SMEs who export, do so outside of Europe with the top markets being the US (35%), Australia (24%) and Canada (20%).
  • China is exported to by 16% of exporting British SMEs, with emerging market Brazil also scoring highly with 10%.

Q. Are SME exporters fully supported to go global?

  • In total 58% of all British SMEs would appreciate more support – whether from trade bodies, the Government, or logistics providers – than they currently receive in order to optimise their international success.
  • This breaks down as 30% saying the support they receive is adequate, but could do with more, 16% who feel support could be more accessible and 12% say they do not have the support needed to proceed.
  • Only 22% of SMEs say they require no further support at all.

Q. What are the top barriers exporters encounter?

  • 88% of SMEs who export have experienced some sort of barrier with costs (22%), losing out on currency exchange (22%) and worries over being paid (20%) scoring the most highly.
  • The report showed the top three markets viewed as the most challenging to enter are the US, Australia and China.

Q. Are SMEs optimistic for the future?

  • In general SMEs feel confident about the future. In five years’ time, 50% of British SMEs believe their trade will be both domestic and international – only 28% believe it will be domestic only, while 8% believe it will be international only.
  • In 10 years’ time, 48% of British SMEs believe their trade will be both domestic and international and only 26% believe it will be domestic only (the figure who believe it will be international only remains at 8%).

Q. What do SMEs see as the biggest critical challenge in the year ahead?

  • Improving customer service, distributing products and services efficiently, and reducing operational costs comprise the top three.
  • The ability to enter new export markets is seen as critical by fewer than one in five (just 19%).

 

Extended Results and Data

European export/import surplus

The average SME exports £553k a year to Europe and imports £535k, an average net surplus of c£18k for those SMEs exporting to Europe

Outside of Europe export/import surplus

The average SME exports £714k a year outside of Europe but imports just £410k, an average net benefit of c£304k for those SMEs exporting globally

YoY comparison of shipping volumes to Europe

2014: 40% of exporting SMEs shipped at least 20 shipments per month

2015: 69% of exporting SMEs ship at least 20 shipments per month

YoY comparison of shipping volumes to outside of Europe

2014: 37% of exporting SMEs ship at least 20 shipments per month

2015: 59% of exporting SMEs ship at least 20 shipments per month

YoY comparison of shipping value to Europe

2014: 43% of exporting SMEs shipped more than £5,000 per month on average

2015: 64% of exporting SMEs ship more than £5,000 per month on average

YoY comparison of shipping value to outside of Europe

2014: 37% of exporting SMEs shipped more than £5,000 per month on average

2015: 57% of exporting SMEs ship more than £5,000 per month on average

Most challenging global markets to enter

1. US (22% of SMEs find challenging)

2. Australia (14%)

3. China (13%)

4. India (11%)

5. Canada (10%)

Top barriers to exporting

1. Costs (22% of British SMEs find challenging)

2. Losing out on currency exchange (22%)

3. Worried about being paid (20%)

4. Not having a physical presence (20%)

5. Language barriers (19%)

Top European markets for British SME exports

1. France (57% of exporting SMEs)

2. German (49%)

3. Spain (37%)

4. Ireland (32%)

5. Italy (29%)

6. Belgium (24%)

7. Netherlands (23%)

8. Denmark (17%)

9. Sweden (16%)

10. Norway (15%)

Top global for British SME exports

1. US (35% of exporting SMEs)

2. Australia (25%)

3. Canada (20%)

4. China (16%)

5. Japan (13%)

6. India (13%)

7. New Zealand (12%)

8. Brazil (10%)

9. South Africa (9%)

10. Mexico (6%)

Top ten types of export

1. Technological equipment (18% of all SMEs that export)

2. Industrial/manufacturing items (12%)

3. Fashion/textiles (12%)

4. Food and beverage (11%)

5. DIY items (10%)

6. Cosmetics/health and beauty (10%)

7. Construction (10%)

8. Homeware (10%)

9. Environment & renewable energy (6%)

10. Furniture (6%)

Top ten critical business challenges faced

1. Improving customer experience (31% of all SMEs)

2. Ability to distribute products and services efficiently (26%)

3. Reducing operating costs (25%)

4. Ability to find new domestic markets and revenue streams (25%)

5. Harnessing technology in the smartest way (24%)

6. Improve the way we advertise (24%)

7. Improve visibility on social media (22%)

8. Attracting & retaining the brightest talent (20%)

9. Increasing competition in our sector (20%)

10. Ability to enter new export markets (19%)

Top European Import Markets for British SMEs

1. Germany (33% importing SMEs)

2. France (32%)

3. Italy (15%)

4. Spain (13%)

5. Denmark (11%)

6. Ireland (10%)

7. Netherlands (9%)

8. Austria (9%)

9. Belgium (9%)

10. Czech Republic & Poland (7%)

Top Global Import Markets for British SMEs

1. China (26% importing SMEs)

2. US (19%)

3. India (15%)

4. Australia (11%)

5. Canada (9%)

6. Japan (9%)

7. Indonesia (5%)

8. Brazil (5%)

9. Mexico (5%)

10. New Zealand (4%)

Forecasting the future and signs of optimism

  • In five years’ time, 50% of British SMEs believe their trade will be both domestic and international – only 28% believe it will be domestic only and 8% believe it will be international only
  • In 10 years’ time, 48% of British SMEs believe their trade will be both domestic and international and only 26% believe it will be domestic only (the figure who believe it will be international only remains at 8%)
  • 70% of British SMEs believe their domestic revenues will increase in five years (rising to 73% in 10 years)
  • 72% of British SMEs believe their international revenues will increase in five years (rising to 78% in 10 years)
  • 73% of all British SMEs are optimistic about their revenue in the next 12 months (16% are very optimistic, 56% are quite optimistic)