Mid-market firms failing to export, bank warns

THE MAJORITY of medium-sized businesses do not trade internationally, fuelling fears that the UK is failing to rebalance its economy.

The survey of 200 mid-market firms from Lloyds Bank also shows than less than one in 10 plan to export in the next five years.

Economists warn that boosting international trade is the only way that Britian will be able to safeguard national prosperity in an increasingly competitive global economy.

The survey highlights the dependence of those firms that do export on Europe, the UK’s main trading partner, which continues to struggle with low growth and high unemployment.

Three in four firms cited the region as their primary export market, with North America second (13 per cent) and Asia third (5 per cent).

Lloyds said UK mid-sized businesses are being too conservative in their export ambitions and are not considering key growth markets overseas even though they are aware of the benefits.

Three out of five firms (58 per cent) with an annual turnover between £25m and £750m said that they do not currently export and just seven per cent of those polled are looking to do so within the next five years.

Recent indicators show that firms are feeling much more bullish about the UK economy; business confidence reached a 22-year high last month, according to Lloyds’ Business in Britain report.

However, experts warn that the recovery is based on rising house prices and consumer spending and fear the impact of forthcoming increases in the cost of borrowing on the recovery.

According to the survey findings, just under a fifth (17 per cent) of firms stated that selling overseas is one of their top three business objectives for the next twelve months.

This contrasts with three out of five mid-sized firms (60 per cent) that say increasing turnover is one of the main aims, followed by two fifths of firms (43 per cent) who are focusing on growing their UK market.

Similarly a third of businesses are focusing on reducing their costs (38 per cent) and a similar number increasing their productivity (34 per cent).

The figures were similar when respondents were asked for their objectives for the next ten years or the next twelve months.

Lloyds said the lack of focus on exports is despite businesses being aware of the benefits.

Of those mid-sized businesses that export around three-quarters said that the main advantages of overseas trade were expanding their customer base (73 per cent) and increasing sales and profit (77 per cent).

Steve Harris, area director for Lloyds Bank Commercial Banking in North, East and West Yorkshire, said: “Although business confidence has reached a record high, mid-sized firms often appear to be overlook the benefits of exporting.

“The size of the international opportunity clearly depends on the nature of the sector.

“However it also reflects the fact that businesses are focusing their efforts on their UK operations first, looking to reduce their costs and increase productivity before embarking on global growth opportunities.”

Businesses listed a number of factors which they said prevented them in exporting to new markets including: not having the right contacts (21 per cent); products not being suitable for overseas markets (20 per cent); not understanding the legal and regulatory requirements (20 per cent); not having the time and resources to investigate (20 per cent); and volatility in exchange rates (17 per cent).

Just under half of UK exporters (46 per cent) said that they found UK Trade and Investment department very useful or helpful in reaching their aims while a similar number (43 per cent) were not aware of the organisation.