Exporting for growth: Unlocking the potential of UK SMEs

Enterprise Nation and The Entrepreneurs Network hosted a policy dinner in the House of Lords, with small business owners, large corporate partners and Lord Offord of Garvel, minister for exports, to discuss the challenges and opportunities facing UK small and medium-sized enterprises (SMEs) looking to expand internationally. 

The dinner was opened with a keynote address from the minister, who said with the UK government setting its sights on an ambitious £1 trillion export target by 2030, SMEs are recognised as key drivers of this growth. 

Shifting economic trends 

 The minister highlighted that while the UK economy has evolved to become 80% services-based, manufactured goods still account for a substantial 45% of exports. This shows the continued importance of high-value, skilled manufacturing and assembly operations within the UK's export mix.

Lord Offord emphasised that many of these manufacturers focus on design and high-end assembly in the UK before shipping products globally, taking advantage of the country's expertise in areas like automotive, aerospace, and machinery.  

The minister underlined that despite only representing 20% of GDP, these export-oriented manufacturers play a crucial role in driving economic prosperity and projecting British excellence to the world. 

 Strong UK SME performance 

 The minister suggested that the UK's SME exporting landscape has grown. For example, he said that the 5% annual rise in UK exports from 2009-2019 demonstrates the potential to hit ambitious new targets. The minister expressed confidence that exports can achieve 2% yearly growth to reach the government's £1 trillion export goal by 2030.

 The minster pointed to signs of success from government initiatives like export champions, and the Export Academy, which he said are helping businesses go global for the first time. This adaptability has been crucial, with services exports growing 15% to offset a 12% decline in goods exports since 2010. 

Regional prosperity through SME exports 

Lord Offord highlighted that empowering more SMEs in regions across the UK to export can help the government reach its key goal of spreading economic prosperity beyond London.  

 Currently, only around 25,000 SMEs engage in exporting activities, despite evidence suggesting that exporters tend to have more ambitious management teams focused on higher-margin products and markets. They are often more productive, profitable, and able to offer higher wages as a result. The minister highlighted his aim to grow the number of exporting SMEs to 500,000, creating well-paying jobs and economic opportunities across all regions. 

 Overcoming knowledge barriers 

 Discussing small business owners' expertise around international trade, attendees cited a lack of knowledge about exporting processes, regulations, logistics and requirements as significant hurdles preventing more SMEs from exploring international expansion.  

 It was suggested that while the Department for Business and Trade's toolkits, training programmes, advisers and resources are valuable support measures, better communication and increasing accessibility of this support were identified as areas requiring improvement.

Attendees highlighted that early-stage start-ups and entrepreneurs, in particular, may not instinctively recognise revenue from overseas sales as "exporting", highlighting the need for increased education and awareness campaigns. 

Collaborative solutions 

Attendees suggested that enhanced regional collaboration, with cities, counties and businesses sharing expertise and best practices, are potential ways to uplift overall SME export capabilities. Initiatives such as business groups, networking events, and digital knowledge portals can help.   

As a suggestion for steps governments can take to boost the number of SMEs exporting, mutual recognition agreements that eliminate duplicative product testing, and certifications and regulatory approvals across markets were seen as having potential to help businesses expand into new countries more seamlessly without excessive re-compliance costs.  

Sustainability through business leadership 

 On the topic of sustainability and reducing carbon emissions from economic activity, the discussion emphasised the importance of business leadership and practical, workable solutions.

While policies set important goals, direct cooperation between countries and global companies will be crucial to finding viable approaches that support sustainability without crippling commerce. Issues like deforestation require nuanced cooperation, with businesses well-positioned to take the lead in delivering outcomes alongside governments. 

Entrepreneur perspectives 

 Entrepreneurs who have already expanded their businesses internationally shared valuable insights. Attendees highlighted how building a strong domestic customer base and relationships is an essential foundation before expanding overseas. However, despite the government support available, accessing the right advice while navigating the myriad of complex regulatory landscapes in different markets is a significant challenge, especially for smaller businesses operating with limited resources. 

 One entrepreneur provided a compelling case study, contrasting the support her company received from the Department for Business and Trade with that from private banking group Santander's Navigator scheme.

She said that while the Department for Business and Trade offered introductions to embassies and high commissioners, Santander provided far more hands-on assistance to help her understand the granular regulatory and compliance requirements of the markets she wanted to enter. This example underscores the importance of tailored, practical support for SMEs navigating the complexities of selling goods and services internationally. 

Reducing red tape 

 There was overwhelming consensus that reducing bureaucratic burdens and "cutting red tape" should be a top priority. The government was encouraged to focus reforms on addressing regulatory hurdles and compliance issues across areas like product certification, licensing, taxes, and customs processes - as these present some of the biggest obstacles for small businesses attempting to go global.  

 The upcoming Single Trade Window platform, a digital portal aimed at streamlining export processes into a single unified interface, was presented as a potential solution for removing friction points that discourage businesses from exporting. 

Financial access and digital transformation 

Access to appropriate financing solutions suited to smaller businesses, as well as education to help SMEs better understand opportunities in foreign markets, were identified as key challenges requiring innovative solutions.  

Productising financial services tailored to the needs of exporters, as well as teaching companies how to adapt proactively to changing global economic conditions, were proposed as potential remedies that could be explored.

The transformative role of digital technologies and platforms like Alibaba in expanding business reach globally while dramatically lowering market entry costs was also highlighted, with technology seen as a great equaliser enabling SMEs to successfully compete against larger, deeper-pocketed corporations. 

Expanding into new markets 

One small business speaker shared real-world examples of the difficulties they faced exporting to the US, extrapolating how those hurdles are magnified for smaller businesses with limited resources.

Intriguingly, they noted a recent shift where high-growth emerging markets like the Middle East have emerged as a higher priority region than Europe for UK companies looking to internationalize their operations in 2023.

Markets like Saudi Arabia are attracting interest due to factors like favourable regulation for foreign investment, while the United Arab Emirate's business friendly free trade zones and innovation hubs are luring British entrepreneurs.

Getting paid promptly was also highlighted as a critical success factor, especially when selling to large government entities that can often have long, multi-month payment cycles that can cripple small exporters' cash flow. 

Collaboration for growth 

 Throughout the wide-ranging discussion, there was a resounding consensus that deep collaboration between all stakeholders in the public and private sectors is essential to support SMEs' success in international markets.  

 Partnerships allowing organisations to combine their respective strengths - whether that's practical business advice, specialised skills training, financing, marketing, or localised expertise - were emphasised as the most impactful approaches for overcoming the challenges and realising the opportunities that exports represent for UK economic growth. 

 As the UK embarks on this ambitious journey to double exports to £1 trillion annually by 2030, empowering SMEs across the nation to navigate the complexities of entering new global markets will be crucial.  

 By addressing knowledge gaps, reducing bureaucratic burdens, leveraging transformative technologies, expanding access to financing, and fostering collaborative public-private support networks, the UK can unlock the full potential of its entrepreneurial spirit and drive sustainable, export-led economic growth and prosperity for years to come. 

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