Bernard Ginns: Europe’s £10 trillion economy won’t safeguard our SMEs

Together, SMEs in Europe employ more than 100 million people. They provide up to 90 per cent of jobs in some industry sectors. And they contribute 58 per cent towards the GDP of the European Union.

In other words, they form the backbone of the world’s largest economy, which is estimated by the International Monetary Fund to be worth more than £10 trillion a year.

Now consider the forecasted trends in global growth. According to the European Commission, the vast majority of growth will take place outside of Europe by 2015. And by 2030, emerging markets will make up nearly two thirds of the world’s GDP.

This reality does not appear to have caught up with Europe’s SMEs yet though. The EU estimates that barely a quarter – 26 per cent – are active exporters while only 4 per cent have plans to do so.

Of the quarter that do export goods and services, only half are doing so with partners outside the EU. In blunt terms, this means that most SMEs in Europe are going to miss out on opportunities in fast-growing economies in places like China and India.

Analysis of SMEs that do engage in international activity reveals a greater dynamism. Research for the European Commission has found that innovation, employment growth and turnover growth are all stronger in companies which trade globally.

The message here to Yorkshire’s 300,000 SMEs is simple. Go forth and prosper or stay local and stagnate.

Entering the world of exports is full of danger though, according to Martin Allison, UK chairman of The Alternative Board, which helps SMEs realise their growth potential.

Mr Allison, the former dean of Leeds Business School, has just returned from an entrepreneurship conference in Tallinn, Estonia, where leading business executives and academics looked at how to create a more productive economic environment in Europe.

He said: “Exporting must be taken on with full diligence and planning; many errors and failings occur with opportunistic and hasty decisions.”

Owner managers should ask themselves if they have a strong enough position to cope with the potential distraction and additional costs and should get as much advice as possible, he added.

“Choose carefully who you work with ensuring you use the right checks on buyers and suppliers and protect yourself from exchange risks and other risks involved by using professional freight forwarders and lawyers,” said Mr Allison.

n ON the home front, most businesses will now be resigned to lower growth prospects for some time to come as public sector spending cuts kick in and executives delay decisions amid fears over inflation and consumer confidence.

There are things the Government can do though to help – and help it must, instead of producing unhelpul legislation that stands in the way of enterprise. Pressure is growing on the Chancellor to match the pre-election business-friendly rhetoric with some substance in this month’s Budget.

Andy Tuscher, regional director for manufacturers organisation EEF, said: “The focus must be on generating the kind of growth our economy needs, both nationally and in vital regions such as Yorkshire. This must come from investment, innovation and trade.”

The EEF wants the Government to set out a growth mandate, which sets out the steps ministers are taking to “dismantle the barriers to growth”, in areas such as tax, regulation, access to finance and skills.

“The growth budget comes at a crucial time for manufacturers across South Yorkshire,” said Mr Tuscher. “While this year has started in good health, sustaining this in the face of uncertainty at home and abroad, as well as generating the right kind of growth will be challenging.

“Firms will only invest, and do it here in the UK, if it makes commercial sense to do so with a high level of certainty and a cost base and regulatory environment that remains stable over the longer term.”

The Government has the power to make some changes to help businesses create the jobs that the country needs. It is crucial that it avoids the temptation to place politics over economics in the forthcoming Budget.

Businesses, on the other hand, should be sensibly exploring new markets for their goods and services if they want to achieve growth in the future. To a large extent, the Yorkshire economy depends on them.