Red tape and accessing credit prevents firms from exporting
- Research shows that nearly three-quarters of exporters don’t have an export strategy in place
The findings of a survey released today (Tuesday) by the British Chambers of Commerce (BCC) show that existing regulations and problems around accessing credit are hindering export growth in the UK. The survey of more than 8,000 businesses shows that nearly two thirds of potential exporters (63%) see access to finance issues as a reason not to trade overseas, while a quarter of companies believe that red tape, such as that associated with export licenses, is a barrier to trading overseas (25%). Furthermore, nearly three quarters of companies that are already exporting don’t have an export strategy in place.
Exporting is an important route to growth for companies at a time when the domestic economy is almost flat. Nearly half (44%) of respondents said they would be more likely to consider exporting if sales revenues deteriorated. More than half of companies that are already exporting said they would look to increase exports further if faced with a deterioration in domestic market conditions (56%).
There are still barriers which prevent non-exporting companies from trading overseas, with financial resource and access to credit as major factors (63%). Seven in ten non-exporters said cash flow and payment risk influenced their decision to export. Only 3% of businesses surveyed had used UK Export Finance, with 20% citing lack of awareness as a reason for not doing so. Regulation is still preventing companies from taking that first step towards becoming an exporter, with one quarter of respondents stating it as a barrier. Furthermore, one in three companies (36%) said that overseas regulations prevent them from doing business overseas.
Furthermore, nearly three quarters of exporters (74%) don’t have a formal export strategy in place. While many large exporters lack a formal strategy, there is a clear size divide which shows that small- and medium-sized companies are even less likely to possess one (42% of SMEs have one compared to 15% of micros). The results showed a willingness from firms to adapt their products and services to suit overseas markets, but almost half (49%) of exporting companies said they had become exporters by accident after being approached by potential buyers from overseas.
- • Create a business bank and improve service in existing banks to address issues around access to finance: Our survey shows that problems with accessing finance prevent firms from getting their foot on the exports ladder. In addition, high street banks must train front line staff to be able to explain state-backed financial products to their business customers.
- • Incentivise the take up of training and mentoring: The Chamber Network is playing a leading role in linking businesses to export training and trade missions, but the government must play its part too by offering financial incentives for non-exporters that take up these services such as a reduced rate of tax on early exporting profits
- • Support more businesses to proactively pursue export opportunities: Introduce a variable fee system within the Overseas Market Introduction Service (OMIS) which is operated by UKTI. If this is based on company size, it would prevent smaller firms from being crowded out. Businesses also need to be more aware of UKTI’s Tradeshow Access Programme (TAP) and the government should invest more money into the scheme.
Commenting, John Longworth, Director General of the British Chambers of Commerce (BCC), said:
“There are still not enough of our great British businesses taking their products overseas. These results show that many firms lack an export strategy, and many only became exporters by chance. We need to find ways to make our businesses think global, and provide them with the support they need to break into new markets. Not only will this help to boost the UK economy, but it will show the world that Britain remains a major global competitor and a nation to do business with.
“The government can make some simple changes which will go a long way to giving firms the confidence and encouragement they need to trade overseas. Incentivising more firms to take part in trade missions would be a start to getting more companies thinking about adapting their products for the export market. Furthermore, the creation of a state-backed business bank would help solve problems around access to finance, which a large number of firms said prevented them from exporting. We need to get behind our businesses and give them the support they need to drive an export-led recovery.”