The focus is on exports, but will smaller UK companies be able to take advantage?

4 min read

The UK has always had the reputation of being a trading nation, yet a quick look at the balance of payments show that imports continue to dominate exports; in fact, it's 30 years since the balance of trade was positive. In May 2015, the value of exports was £25.8billion, while imports were worth £32.8bn – a £7bn trade gap. The top five trading partners were Germany, the US, China, the Netherlands and France.

The Chancellor George Osborne noted in his recent budget that the UK's trade balance as a share of GDP has improved slightly, from -2.4% in 2010 to -2% in 2014. But he also pointed out the Office for Budget Responsibility's forecast that, while exports will grow by 3.8% in 2015 and 2016, they will be offset by a similar growth in imports.

Will UK electronics companies benefit from the increased focus on exports? There is suspicion that smaller companies are having problems getting access to overseas markets; those responding to a recent New Electronics survey cited access to markets as one of the critical issues facing either the industry or their company.

So are smaller electronics companies in the UK looking to export or are they more focused on business at home? Ken Ball, electronics manufacturing and supply chain programme manager with techUK, said it was a mixed picture. "Some have a keen export outlook, but identifying export opportunities can be difficult," he said.

And are those companies looking to grow their international business having problems accessing markets? "Tradeshow Access Programme (TAP) funding through UK Trade and Investment (UKTI) is always very helpful," he noted, "but not all SMEs realise that it is available. Companies need to plan up to a year ahead for major shows, such as electronica, but UKTI funding is often not finalised until a few months before the show."

Asked whether it is now easier for companies to access international markets, Ball noted the UK electronics design and manufacturing industry is focused largely on high value, high margin products that are world class and, by implication, those companies' services should be in demand.

"The problem is that, although UKTI is very keen to help to open up new markets through funded trade missions, it doesn't always take into account the realities of exporting electronics. Some of the products from these companies are then caught by export licensing restrictions. This can – and has – led to companies winning orders, only to find they can't get the necessary licenses to export the products."

If companies are looking to enter the export market for the first time, UKTI is looking to help. Lord Maude, minister for Trade and Investment, announced in May a programme of expert advice and support targeted at those companies looking to address international markets for the first time. The move was timed to mark the beginning of the latest Export Week.

Another Export Week is planned for November, with a series of events planned to take place around the UK, all aimed at those looking to start or increase their international business. According to UKTI, previous Export Weeks have seen more than 27,000 UK companies attend various exporting focused events and it claims that companies who work with it are likely to add £100,000 to their sales within 18 months.

The First Time Exporters (FTE) initiative announced by Lord Maude is a support package which includes training and advice, as well as the opportunity to take part in trade missions to nearby markets to help develop contacts. FTE also helps those considering exporting for the first time to take advantage of digital opportunities, with dedicated digital trade advisers and an online planning tool.

"We hope the launch of First Time Exporters will encourage more companies to take their first steps on the export journey and take advantage of the demand for British goods and services that exists overseas," he said

"Last year, we saw 48,000 companies draw on UKTI support; these businesses went on to create or safeguard 220,440 additional jobs. I would urge businesses of all sizes to use this opportunity to find out more about the services that are available to them through UKTI, regardless of their level of exporting experience."

From techUK's perspective, what is the best way to go about entering the export market? Should companies try to 'go it alone', join a supply chain or use local distributors?

Ball said: "If a supply chain exists, then it is a lower risk option. However, the UK supply chain is not well understood nor mapped out by government or by industry, so overseas supply chains will be even more difficult to navigate.

"Distributors can work well, but you do need personal knowledge and recommendations of who to use in order to make that successful.

"We have run brokerage sessions at European trade shows that have linked UK SMEs with those visiting. Being part of an industry network is probably the best approach to finding the right channel."

These brokerage events have shown that Tier 1 companies from the Far East and Europe recognise and value the innovation available from UK SMEs and from micro companies – those with less than 10 employees. "Companies we have worked with over the last year have been pleasantly surprised at the talent available," Ball continued.

But what could be done better? That was the question asked by two members of the last Shadow Cabinet. Ed Balls, shadow chancellor, and Chuka Umunna, shadow industry secretary, commissioned Graham Cole, chairman of AgustaWestland UK to find out. The terms of reference were to provide an independent report on how government should support exporters through skills, including in the area of languages, finance and access to markets, as well as how government export schemes can be simplified and streamlined.

According to Cole, the report is 'a brief from business to the Government that should inspire immediate action'. "While some of our recommendations will take time to implement, owing to the nature of the reforms proposed, delaying action on these items for fear of complexity will ensure we remain in the export slow lane."

The report recommends five action areas: cabinet level leadership to drive exports; reform to the relationship between UK Export Finance (UKEF) and UKTI; a 'one stop shop' for export support; a public procurement strategy that brings UK SMEs into the supply chain; and getting trade and exports on the education agenda.

If the Government is serious about exports, the report contends, it needs to commit resources and, most of all, the highest possible political leadership within Cabinet and across Whitehall.

In its conclusion, the report says 'an exports led recovery lies at the heart of the new Government's economic policy. [This] Commission's role from the outset has been to support that priority by examining and reporting on what business wants from the Government towards that shared goal.

It notes 'These proposals for action are critical if we are to achieve a step change in the UK's export performance. They emerge from within business and are designed to help UK companies seize the extraordinary opportunities of the global economy'.