As the results from our Quarterly Economic Survey (QES) demonstrate, 20% of respondents saw export sales increase in Q2 of 2018. Since this comes at a time of uncertainty due to Brexit,
other political and economical factors, we should remain positive about international growth in the coming months. Stronger global economic growth supports the demand for UK goods and services and new research has shown that small businesses are more optimistic about their international growth prospects than domestic expansion.
Adam Slater of Oxford Economics believes that by 2050, exports to the single market could make up less than 5% of Britain’s economy.
These findings all support the justification to export, which yields economic and financial rewards for businesses that pursue the path to global commerce.
Exporting enables a business to spread financial risk, relieving them of dependence on any single, domestic market. Equally, the exposure to new markets can tangibly increase sales, yet some businesses remain reluctant to take that leap.
Perhaps it’s a fear of the unknown, a concern over retaining control, or simply a question of logistics that phase new entrants to export. There are some common barriers to export that we see all too often, yet they can be relatively simple to overcome with the support and guidance of experts in the area, for instance, at your local Chamber of Commerce.
In this post, we’ll look at some of these a little more closely and explain how you can mitigate against the challenges.
Where to start?
A report from the Centre for Economics and Business Research (CEBR) revealed that less than a fifth of SMEs were selling their goods and services overseas, compared with two-fifths of big businesses in the UK. The report claimed that if more SMEs were helped to enter new markets for international trade and brought their export rate up to 40%, it could be worth around £141.3bn in a year in overseas sales. With help being such a vital resource it’s one of the reasons many SMEs remain hesitant, but overcoming the challenges and being knowledgeable about the common barriers is the key to successful export.
Part of the role of a local Chamber of Commerce is to support and guide their members in the decision to export: it will assist in various ways to create clarity:
- ensuring Members are well-informed about relevant regulations,
- offering knowledge of potential new markets,
- making businesses of the cognisant of the risks inherent in trading elsewhere, and
- giving best practice advice and experience on documentation.
There are also workshops and training courses available in abundance, so take advantage of these opportunities to improve your knowledge before taking the leap.
How do I know I’ll get paid?
International credit risk is a big factor in the decision to export. How can you be sure of the creditworthiness of a foreign debtor? An unknown entity with whom you’ve never done business, and are about to deliver thousands of pounds worth of goods to - it’s a financial and reputational risk. In these cases, you might want to raise a letter of credit.
A letter of credit, also known as a documentary credit, is a financial document issued by your bank which acts as a guarantee of payment, provided the documents submitted are accepted as being compliant. If for whatever reason, the buyer does not settle their side of the deal, the buyer’s bank will settle these costs. So you are essentially guaranteed payment, as well as peace of mind.
How do I secure my reputation?
Building a reputation within the export market takes perseverance, persistence and time. Global networking is vital to maintaining and nurturing a reputable brand presence and establishing yourself as a key player in the export market. It takes time to build a reputation in new country markets amongst overseas buyers, as well as establishing trust with those buyers for high-quality goods, on-time deliveries, strong customer service etc. Making yourself known and present at physical and virtual events helps you build awareness of your brand and expose your name as a player in the export market.
What about Brexit?
Brexit will inevitably bring a wave of uncertainty across the business climate, but it’s how businesses ride this wave that will determine how they prosper. For this reason, it is understandably a common barrier to those wishing to export because of the volatility and uncertainty it presents.
The truth is, in the current climate, relying on the EU alone is short-sighted because the real rewards lie further afield. Global cross-border commerce is growing at an alarming rate, and the demand for UK goods and services is growing with it. Since the EU referendum, the pound has lost 20% of its trade-weighted value. Paired with the rise of input costs and higher inflation forecasts means a higher cost of living for UK consumer. But this devaluation of the pound means a boost for UK export, as the demand for British goods overseas grows and becomes more affordable. Businesses can take advantage of this increased demand while we’re riding this wave, and set up a reputable export trade to mitigate any risks associated with the domestic market.
On top of these common barriers are issues such as legal, cultural and language barriers can leave business owners favouring the familiarity of the domestic market. However, with the right guidance and confidence, obstacles to export need not seem so insurmountable.
The decision to export is one that requires a great deal of risk-planning, however, risk-averse behaviour can prevent business owners from enjoying the great scaling and growth opportunities that exportation yields. A partnership with your local Chamber of Commerce can be all the support you need when taking this leap to prepare, prioritise and plan with unshakeable confidence. If you’d like to speak to us about your export opportunities, contact us today.