Region’s firms dip toes into key export markets

Analysis of credit insurance demand from regional companies shows a near three per cent shift from domestic to export trade over the last year.

The research comes as questions are raised over the Government’s ability to deliver on its strategy to support exporters.

Ministers are pinning their hopes on more UK businesses, especially SMEs, selling goods and services overseas to help drive a sustained economic recovery in the UK.

But a Commons Select Committee report out today warns that public spending cuts will damage the ability of UK Trade & Investment to help business.

The new research from insurer Atradius, supported by law firm Irwin Mitchell, shows a strong move towards international trade from the chemicals, machines, metals, construction and transport sectors in Yorkshire.

But it also reveals a reluctance among SMEs to trade beyond the confines of Europe.

Exporters with a turnover of less than £10m are mainly trading within the EU – 85 per cent – while bigger exporters are more open to trading further afield, with 44 per cent trading outside Europe.

The European Commission estimates that the vast majority of growth will take place outside of Europe by 2015. It believes that emerging markets will make up nearly two thirds of the world’s GDP by 2030.

Atradius’s research shows that Asia is the number one export destination for Yorkshire’s larger companies.

Firms with a turnover of more than £10m have three times as much trade exposure in Asia than in North America.

The US remains the number individual export nation, although China has moved up into second place in the last year.

Commenting on the findings, Paul Johnson, a partner at Irwin Mitchell, said emerging markets “offer massive opportunities but also threats if UK SMEs are not able to access their markets”.

He added: “There has certainly been a shift to businesses seeking to export. We have seen a number of our clients looking to do so and capitalise on the favourable exchange rates.”

A weaker pound makes British goods and services cheaper and more attractive overseas, but venturing into new markets can be daunting, especially for smaller businesses.

Government support, through UKTI, has helped some firms navigate the risks of exporting for the first time, but there are concerns that its future impact will be limited.

Nick Bates, the new head of Irwin Mitchell’s Leeds office, said: “As the recession squeezes businesses in Europe and the US, emerging markets are increasingly the place to broaden Yorkshire businesses’ horizons.

“However, the challenge is how to ensure that when things do not turn out as expected, Yorkshire businesses are able to protect themselves, their cash and their products so they can salvage something from the situation.”

Companies face not only language and cultural barriers, but also an entirely different attitude to disputes, he said.

Mr Bates added that conflicts could lead to companies being frozen out of trade relationships which could damage their reputation in new regions.

Irwin Mitchell said exporters must find reputable partners and take advice on any significant or long term moves.

According to Mike Rowan, regional manager for the North at Atradius, the key risks for SMEs entering international trade are “lack of preparation, not knowing the buyer sufficiently, giving inappropriate credit, not negotiating sufficiently hard and not having checks and balances in credit management”.

He said exporters should research potential partners and new markets, take out payment protection, pick up on early warning signs of delays in payment, engage in dialogue and take action to recover debts.

The Atradius research also revealed an increase in pitches for larger contracts in certain sectors, especially from Yorkshire engineering firms targeting Far East markets.

Atradius, which has an office in Leeds, analysed demand for trade credit insurance in Yorkshire in the first quarter of 2011 and compared it to the same quarter last year.

Irwin Mitchell sponsored last year’s Yorkshire Post Business Barometer, which polled company directors.

OVERSEAS TRADE SHIFT ‘SURPRISINGLY LOW’

IN research supported by the national law firm Irwin Mitchell, the insurer Atradius studied demand for trade credit from firms in Yorkshire.

Its key finding was a 2.86 per cent shift from domestic to export trade in 2011. Overall export trade exposure grew marginally by 0.4 per cent.

Atradius described the shift as “surprisingly low, given the emphasis being placed on export being key to our economic revival by the Government”.

A spokeswoman for the Cardiff-based company said: “Broken down, however, there is still a strong export story to tell and from both these figures and anecdotally, we are seeing a strong move towards export in certain sectors.”

These are chemicals, machines, metals, construction and transport. The level of export in the food and agriculture sectors is increasing considerably, the spokeswoman added.