Government measures to help smaller businesses sell their products and services overseas are welcomed.
Yesterday’s Trade and Investment White Paper, unveiled by business secretary Vince Cable, appears to show that the Coalition is serious about helping more small to medium-sized enterprises (SMEs) trade internationally.
The main measures announced include refocusing Government bodies UK Trade and Investment (UKTI) and the Export Credits Guarantee Department (ECGD) to provide better hands-on help to SMEs who are considering trading internationally- particularly in emerging markets such as China and India.
Research shows many SMEs would like to explore overseas markets but are deterred from doing so by a lack of local knowledge, language barriers and difficulties in accessing reliable and affordable information.
The white paper also included a pledge to create a guaranteed loan scheme for exporters. Dubbed the ‘export EFG’ due to its similarities to the existing Enterprise Finance Guarantee (EFG) scheme, this should allow more SMEs to finance export orders.
A shake-up of short-term credit insurance provisions to aid firms exporting non-capital goods, such as those in the service sector, was also announced. A lot of these measures are very welcome and reflect precisely what we have been lobbying the Government for in recent months. They will mean that the UK Government is a step closer to other European nations in terms of the support it gives to SME exporters.
The ‘export EFG proposal’ is particularly welcome and should, if implemented properly, be hugely helpful to SMEs which have been prevented from accessing the funding required to exploit foreign markets.
And while we shouldn’t downplay the value of the European export market – our close proximity to Europe and shared legislation mean it’s a vital export market for many SMEs – the white paper’s stated aim of opening up fast-growing economies such as India and China to British SMEs should be applauded.
I would also welcome the Government’s acknowledgement of the role it needs to play in taking the lead on international trade and devising an overall strategy on behalf of smaller exporters.
That’s something I have specifically called in recent months for – the Government needs to effectively act as a ‘sales director’ for the UK, providing leadership and the sales tools required, if its SMEs are to embark on a successful global expansion drive.
A recent survey – carried out in association with foreign exchange specialists Global Reach Partners – found that just a fifth of smaller companies which currently do not export would consider doing so in the future.
Many respondents to the survey cited a lack of available information on overseas markets as the main factor preventing them from exporting. The lack of a local presence, lack of language skills and uncertainty over the demand for their services were also cited as concerns, along with fears over the impact a move into exporting would have on their cash flows.
There is a real difference in going from trading within your town, your county or your region, or even within the UK, to taking that step to international trade.
The announcements made yesterday should help with this, but there’s a lot more that could be done to help promote export readiness among smaller firms and break down some of the perception barriers that exist within businesses that have a desire to export but don’t really know how to take that next step.
Bringing in practical mentors could be one way that owner-managers could learn face-to-face from exporters who do it day-in day-out, for example.
UKTI should play a greater role in the issue – specifically in providing SMEs with the market intelligence they need before embarking on an export drive. I believe the Government needs to address widespread concerns about the impact the Bribery Act will have on smaller exporters – or smaller firms considering exporting.
Although its implementation has now been delayed beyond April, I believe many smaller businesses will be left unsure as to whether or not they are leaving themselves open to prosecution under the Act due to potential difficulties in distinguishing between bribery and routine corporate hospitality.
I am also concerned that the Act will have a disproportionate effect on smaller companies, with big businesses and multi-nationals much better-placed to interpret and understand their obligations under the Act.
Smaller firms will also bear a greater relative burden in complying with the Act, in terms of the time and money involved in putting internal processes in place to ensure compliance.
I expect the spirit of this legislation is essentially aimed at multi-national companies and is intended to deter them from securing lucrative state contracts through large-scale bribes to foreign governments.
But there is the concern that smaller businesses could be seen as easy pickings by prosecutors if they find tackling large companies presents too much of a hard target. And even if widespread prosecutions of SMEs fail to materialise, smaller businesses will still be put at a disadvantage due to the disproportionate cost of putting preventative procedures in place in the hope of minimising their chances of falling foul of the Act.