Mid-sized businesses reluctant to export despite fresh confidence

UK mid-sized businesses are not considering key growth markets according to new research, with less than one in ten firms planning to export in the next 5 years.

Three out of five firms (58%), with an annual turnover between £25 million and £750 million, said that they do not currently export and less than one in ten (7%) are looking to do so within the next five years, indicating that over half of mid-sized businesses are still cautious in considering their long-term export strategy.

The research comes as recent indicators have shown that firms are more bullish about the UK economy with business confidence reaching a 22 year high according to the Bank’s recent Business in Britain report in July.

According to the findings, just under a fifth (17%) 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%) that say increasing turnover is one of the main, followed by two fifths of firms (43%) who are focusing on growing their UK market.

Similarly a third of businesses are focusing on reducing their costs (38%) and a similar number increasing their productivity (34%). The figures were similar when respondents were asked for their objectives for the next ten years or the next twelve months.

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%); products not being suitable for overseas markets (20%); not understanding the legal and regulatory requirements (20%); not having the time and resources to investigate (20%); and volatility in exchange rates (17%).

Firms were confident of attaining trade finance with only a fraction (5%) of firms citing access to finance as a barrier to exporting.

Of those mid-market businesses that do export, Europe is top with three in four firms (74%) citing the region as their primary export market, with North America second (13%) and Asia third (5%).

When asked which countries they expect to sell to over the next ten years, one in seven firms (14%) said China, however the next highest were the more established export markets of Germany (6%) and France (6%) close behind.

Only a proportion of UK exporters have taken logical steps to export with half of firms (50%) visiting potential clients to research their market, under a third (31%) undertaking market research and under a quarter (23%) building an export plan with their banks.

Just under half of UK exporters (46%) said that they found the Government’s UK Trade and Investment department (UKTI) very useful or helpful in reaching their aims while a similar number (43%) were not aware of the organisation, showing an opportunity for more awareness and education about the services on offer.

However, Tim Bailey, director of Chamber International the organisation that provides overseas trade support to chambers of commerce, said: “Our experience working on the ground with new and experienced exporters is that we have never been busier.

“There is huge interest in exporting and massive demand for help and advice. The economic downturn created a far wider understanding among businesses that they cannot rely on domestic markets and also that there is demand for British goods and services overseas.

“We’ve helped a number of several SMEs export for the first time during the last six months.

“Many we are supporting are looking beyond Europe, where the economy is flat, to high growth markets in Asia and the Middle East and it has to be borne in mind that the research and preparation for this takes time and careful planning in order to be successful.

“From what we see and hear from businesses, there is a groundswell of interest in exporting but it could be one-to-two years before this becomes apparent in economic results.”

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