Smaller Firms Need More Support To Trade With High-growth Markets
14 May 2012 in Chamber News
• Large businesses are more likely to export to high growth markets than their smaller counterparts
• Regulation and export tariffs top the list of barriers to exporting
The findings of a survey released today (Tuesday) by the British Chambers of Commerce (BCC) shows that businesses, smaller firms in particular, need more support to trade with high-growth markets. The survey of more than 8,000 businesses suggests that UK exports are held back by a focus on traditional or mature markets at the expense of larger, faster-growing economies. The EU remains the most popular destination for exports. When asked where they export to, 88% of respondents sell their products or services to the EU. This compares to 47% of businesses that export to BRIC countries (Brazil, Russia, India and China), and 55% to other Asian and Middle-Eastern markets such as Thailand and Saudi Arabia. However, while nearly three-quarters (73%) of large firms trade with BRIC countries, only a third (32%) of micro firms do business in these fast-growing markets.
The survey also asked exporters where they see the greatest opportunities for growth in the next twelve months. Two-thirds (67%) of large exporters see the BRIC economies as providing the most export growth, but this falls to around half (49%) among medium-sized firms, and a third (33%) of micros. More smaller businesses believed that the EU offers the greatest opportunities for export growth (56%).
The results showed businesses that belong to an international group or supply chain are 50% more likely to see growth opportunities in the fastest-growing, emerging economies, than those that don’t. The transport, manufacturing and education sectors are the most enthusiastic about opportunities for growth in developing economies.
Export sales among UK firms are hindered by several barriers, from languages and cultural differences to overseas public sector procurement rules. Overall, regulation and export tariffs top the list of barriers for exporters. Those trading in Africa quote political risk as the biggest concern.
Better targeted support for exporters to access the fastest-growing markets: Businesses that export to the fastest-growing markets are the most likely to encounter barriers that hold back sales. This partly explains why there is a size divide in these markets – smaller businesses have fewer resources to overcome these obstacles. As it seeks to expand its reach from 25,000 to 50,000 SMEs over the coming months, UK Trade & Investment (UKTI) and its partners must work to address the reticence of some sectors and size groups to consider trading in new markets. Targeted support, such as sharing practice on foreign bureaucracy and introductions into new markets, is crucial in helping companies access high-growth BRIC countries.
Open up new markets through free trade agreements: There is a clear relationship between the volume of UK exports to overseas markets, and the formal legal agreements that underpin trade. SMEs in particular, which lack the resources of larger companies, would benefit from breaking down the tariffs and bureaucracy of markets that are not currently covered by free trade agreements with the EU. The government should look to create bilateral free trade agreements with India and Japan and further liberalise trade with the United States.
Re-establish foreign languages as core subjects within the UK national curriculum and in workplace training: Differences in language and culture are seen as important barriers to entering fast-growing markets like the BRICs, Asia and the Middle East. The National Curriculum must be revised so that studying a foreign language is compulsory until AS level, and incentives such as tax credits for small and medium-sized businesses introduced for those firms that make a significant investment in language training.
Commenting, John Longworth, Director General of the British Chambers of Commerce (BCC) said:
“More and more UK businesses are taking their goods and services overseas, but many still face obstacles when trading internationally. Smaller firms in particular can find it difficult to break into newer, emerging markets, such as Brazil, India and China. These countries are growing more than traditional export partners like those in the eurozone, and so present real opportunities for businesses. However, small firms often lack the resource of larger firms, which is why they need more support to break into new markets. The government must provide more targeted help and advice for smaller firms to help them take their first step in trading with these fast-growing economies.
“Britain has the potential to be a great exporting nation. The government must work together with business to
unlock the potential of Britain’s exporters, who will in turn help to drive the economic recovery.”