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How SMEs can overcome common barriers to growth

For the first time since 2007, things are looking up for the economy. As the UK eases away from recession, and towards sustained growth, there is mounting optimism amongst businesses that a period of prosperity is on the horizon. Exporting is a vital to this, as evidenced by the demanding government target of increasing exports to £1tn by 20201. Comprising a staggering 99.9% of private sector businesses2, which account for 49.8% of GDP3, SMEs have a crucial role to play in this process.

Arriving amidst murmurings about the viability of this target4, the release of the Great British Export Report comes at an important juncture for the UK economy, and reveals an unspoken truth about the gulf between popular opinion and what is happening on the frontline. Delving beneath the surface, we generated a report offering insight into what SMEs really think about exporting, why so many are not currently doing so, and how these barriers can ultimately be overcome.

One of the most interesting findings from our report relates to the exporting challenges as perceived by UK SMEs. Although UK SMEs are doing a good job, there seems to be a lack of awareness—not only of the benefits to exporting—but to the resources available, which are plentiful if you know where to look.

The future is indeed looking bright, but if the economic recovery is to continue, now is not the time to rest on our laurels; now is the time to push towards further growth and a period of sustained stability which can be achieved, in part, through stronger exporting activity.

The Great British Export Report places the thinking, plans and priorities of UK SMEs back on the national agenda. By highlighting the markets deemed most difficult to enter, and where support may be lacking, our report aims to ensure British SMEs are given the best possible platform and support to succeed, helping to drive our economy forward.

In a global economy rich with opportunity, the fundamental exporting question SMEs must now ask themselves is: "If not now, then when?"

Trevor Hoyle, Vice President, FedEx Express UK & Ireland
July 2014


1 The Financial Times, March 2014
2 Federation of Small Businesses, February 2013
3 House of Commons Library Note, June 2014
4 The Guardian, January 2014


 

KEY FINDINGS

The Great British Export Report canvasses the current behaviour and opinions of over 1,000 small to medium sized enterprises across the UK. Some of the key findings are as follows:

Q. What proportion of UK SMEs is currently exporting?
A. Only one quarter of Britain's SMEs are currently 'internationally active', a worryingly low figure at odds with government targets. However, fast-growing SMEs are three times more likely to export than those in decline highlighting the significance of a global approach to sustained success.

Q. Where do UK SMEs export to?
A. The US, Australia, and New Zealand top the list of countries UK SMEs export to. Worryingly, some of the world's fastest growing global markets—China, Russia, Brazil—are severely under- represented.

Q. What markets are seen as the most challenging to enter?
A. The world's second biggest economy, China, is seen as the most challenging meaning countless missed opportunities for growth as economic conditions improve. Other challenging markets include Russia, US and the Middle East.

Q. What are the main problems SMEs experience when exporting?
A. More than half of all SMEs which export say more support would be of value. Lack of technical knowledge, concern over the costs and the current economic conditions are all cited barriers to exporting.

Q. How much importance do SMEs place on exporting?
A. Thirty-five percent of SMEs say reaching new markets will be critical to their success but half say they want more support.

Q. Of the SMEs which do currently export, how important a part will exporting play in the future?
A. A significant proportion, 41%, believe their trade will be mostly international in just five years' time, rising to 57% in 15 years.

Q. Who does export?
A. SMEs in London and the South West are most likely to export overseas (32%) compared to just 15% in the North West and 13% in Scotland. SMEs in the Manufacturing and Technology sectors are those most likely to export (59% and 41% respectively). Troublingly, more than 80% of SMEs in the large metropolises of Birmingham, Manchester and Liverpool do not export.

Q. Of those SMEs which do export, what is the average value of shipments?
A. To Europe, the average value of shipments is £273k p.a. but this varies dramatically by business size, from £33k p.a. for smaller organisations rising to £484k p.a. for larger SMEs. To the rest of the world, the average value of global shipments is £270k per SME p.a., rising to £397k p.a. for larger SMEs.

Q. What markets are viewed as having the greatest potential?
A. The US, China and Middle East are all seen as the global markets with the greatest potential. Despite its fast moving emerging economies, less than 1% saw Africa as a region with the greatest potential for growth. 3% of SMEs see Russia as the market with most potential for growth but only 1% see Brazil in the same light.

EXTENDED RESULTS AND DATA

Top ten export markets for UK SMEs which export outside Europe  % of SMEs    Most challenging markets to enter  % of SMEs 
 
1. US  44%   1. China  44%
 
2. Australia  30%   2. Russia  30%
 
3. New Zealand  20%   3. US  20%
 
4. Canada  20%   4. Middle East  20%
 
5. South Africa  17%   5. Japan  17%
 
6. China  15%   6. Brazil  15%
 
7. Japan  14%   7. India  14%
 
8. United Arab Emirates  12%   8. Australia  12%
 
9. India  12%   9. Turkey  12%
 
10. Russia  12%   10. Nigeria  12%
 
         
Sources of useful advice  % of SMEs    Global markets with greatest growth potential  % of SMEs 
 
1. Internet  44%   1. US  23%
 
2. Government  30%   2. China  11%
 
3. Trade bodies  20%   3. Middle East  9%
 
4. Bank  20%   4. South Africa  4%
 
5. Other SMES  17%   5. India  4%
 
6. Logistics providers  15%      
     
         
Barriers to exporting % of SMEs   
Critical to success over next 12 months
% of SMEs 
 
1. Lack of technical knowledge 20%   1. Improving customer experience 44%
 
2. Concern over the costs 20%   2. Ability to distribute products and services efficiently 41%
 
3. Concern over the resource and effort required 17%   3. Harnessing new technology 37%
 
4. Waiting for economic conditions to improve 14%   4. Ability to enter new markets 35%
 
5. Uncertainty over which market is right 13%   5. Reducing operating costs 26%
 
      6. Attracting and retaining new talent 25%
     
      7. Improved access to finance 20%