In a detailed report which examines the way UK SMEs do business overseas UKTI poses the question, “ does trading overseas tend to improve company performance?”
In answer to that question UKTI Acting Chief Executive Susan Haird said that their findings, “show clearly that those businesses that are grown internationally tend to enjoy increased levels of growth productivity and innovation…”
One of the most exciting parts of the report for British SMEs is that the data produced shows that many fledgling companies are seizing the chance to successfully grow their business outside the home market.
UKTI said:
- In response to sluggish domestic demand the percentage of companies trading overseas rose from 26% to 31% over a two-year period.
- More young companies are grabbing international opportunities from an early stage; almost 17% of new companies currently active abroad are classified as “born global” – so they have been doing business overseas from the outset.
- 37% of companies less than five years old reported no significant barriers to doing business overseas.
- Around 38% of companies said that exporting delivered a level of growth not otherwise possible…
- Many of the companies surveyed said they experienced a “virtuous cycle” that is where exporting leads to new innovation which in turn leads to further exporting.
Data extracted from UKTI’s New Markets, new ideas: How exporting fosters innovation and growth.
What Overseas Markets are UK SMEs Targeting?
The current top export markets (most valuable) for UK companies are:
- United States £38,001
- Germany £27,852
- Netherlands £21,328
- France £19,189
- Ireland £16,195
- Belguim/Lux £13,625
- Spain £8,897
- Italy £8,819 .
(Value of Goods in £ million 2010; data extracted from UKTI’s New Markets, new ideas: How exporting fosters innovation and growth.)
While not ignoring the UK’s traditional European and US export partners, SMEs, and that includes companies with less than 10 employees, are casting the net wider and breaking into markets designated as high-growth.
UKTI consider these markets as high-growth targets (sample only):
- Mexico
- Columbia
- Turkey
- Egypt
- Saudi Arabia
- United Arab Emirates
- South Africa
- Singapore
- Vietnam
- Malaysia
- Indonesia
Many prospective markets are predicted, in terms of GDP, to grow in 2011 while some already have high levels of Foreign Direct Investment, a growing middle class and well-educated population. Consequently they provide an attractive option for UK businesses with an eye on overseas expansion.
BRIC Countries Offer Major Opportunities for UK Exporters
The above countries and others will over the coming years, become export partners for both new and established UK companies. However, the BRIC countries of Brazil, Russia, India and China are expected to provide major opportunities for British business.
Each prospective market has its own particular set of challenges that must first be overcome. It may be customs barriers in Russia, language and cultural barriers in China or legal and regulatory barriers in India, all cited by UKTI as problematic areas, which must be addressed.
World Bank Logistics Performance Index
With this in mind, the World Bank produces a Logistics Performance Index that ranks countries in terms of ease of importing and exporting. Topped by Germany with Somalia unsurprisingly propping up the bottom the index provides a mass of relevant data. It is required reading for all SMEs planning to export their products or services.
There is recognition that new companies may not have the necessary expertise and consequently are unsure about the best way forward. Yet there is considerable help and advice available from UTKI through their Passport to Export Programme, which gives expert trade advice and practical support to businesses investigating the export market.
While exporting may seem a daunting undertaking for many new businesses, they should take heart from this report. Age and lack of experience need not be a barrier to exporting; there are a number of examples cited where businesses have succeeded despite their lack of size and exporting experience. “One in three young firms are already doing business in at least one high-growth market.”
In summing up UKTI said, “there are growing opportunities for British SMEs but along with that comes greater competition.”
Sources:
World Bank, Connecting to Compete 2010 (includes Logistics Performance Index) site accessed 2 September 2011
UKTI New Markets, new ideas: How exporting fosters innovation and growth, site accessed 2 September 2011
UKTI, Discovering High Growth: How UK SMEs are breaking into high-growth markets, site accessed 2 September 2011
UKTI, New research reveals how UK SMEs do business overseas, site accessed 20September 2011
