THE UK is not fulfilling its exporting potential. We are at the bottom of the G7 in terms of our trade deficit and look certain to miss the export growth target of £1 trillion by 2020 that was set by George Osborne.
Given the huge economic benefits that exporting brings, the Secretary of State for International Trade, Dr Liam Fox, was right at the Conservative Party Conference to highlight the need “to stimulate and support our exporting potential.” In the post-Brexit environment, this is more important than ever.
Yet how do we achieve the required transformation?
Part of the solution is to turn more of our SMEs in Yorkshire into exporters. A recent report by the Cebr, commissioned by World First, found that less than a fifth of UK SMEs export compared to over 40 per cent of larger businesses and only an additional five per cent of SMEs expect to start exporting in the next five years.
That said, if this five per cent increase materialised, then the UK economy would receive an additional boost of £33bn. If SMEs were to go further and match larger businesses, then the benefit would be a staggering £141bn – more than the combined UK Government budgets for health and defence in 2015/16.
Strikingly, the data also highlighted that SMEs in Yorkshire are already outperforming many of their business peers across the rest of the UK. The typical SME exporter in the region is currently boosting its revenue from exporting goods and services by £879,321 a year – three times more than the national average.
At a time when economic consensus generally views the North to be lagging behind the South, such findings are a welcome step change and highlight that the region is punching above its weight when compared to its domestic economic contribution.
Given current performance, think of the added value to the economy of the region if we could encourage more SMEs to export. As the Government plans to build on the ‘Northern Powerhouse’ proposal to boost economic growth, exporting has the potential to help achieve its transformative objectives.
Cynics will say that while such a boost would be welcome, getting more SMEs to export will not be easy.
However, while an exporting revolution will not happen overnight, by delivering on the following four steps, we can help turn more SMEs into the next mini-multinationals:
Firstly, there is a need to change the mindset of our SMEs from one where international expansion is considered unobtainable to one where trading across borders is a normal thing to do within business life in the UK.
Campaigns such as Exporting is GREAT have made inroads in raising awareness and new campaigns must build on this momentum. A recent Leeds LEP study of 970 local businesses found that 85 per cent of non-exporters had not even considered exporting. Such attitudes may have built up over time and it is likely they reflect a lack of understanding of the potential benefits exporting can offer.
Secondly, the creation of a Government Minister for Scale-Ups could go a long way in supporting businesses in their development and drastically improve exporting figures in the UK.
Thirdly, as Prime Minister Theresa May hits the reset button on the UK’s industrial strategy, she must place SMEs at the heart of her trading ambitions for the nation. As part of this process, there is a need for a greater focus on the type of industries we want to export more and where want these exports to go.
Beyond the European Single Market, there is significant untapped potential in emerging economies and SMEs should be encouraged every step of the way to explore such opportunities.
Lastly, as the Government also progresses towards the formal start of negotiations around the UK’s exit from the EU in 2017, it must ensure that SMEs are consulted in the same way and to the same extent as larger businesses along each stage of the process.
SMEs are the engine room of the Yorkshire economy and have the potential to lead the way in boosting the UK’s exporting performance. The recent fall in the value of the pound also means that there has never been a better time to start exporting. With the additional revenue on offer for SMEs, it is clear that the rewards outweigh the risks. It is time to think global.
Jonathan Quin is CEO of World First, a foreign exchange company.