UK mid-sized businesses are being conservative in their export ambitions and are not considering key growth markets overseas, even though they are aware of the benefits, according to new research from Lloyds Bank.
Fully 58% of firms turning over between £25m and £750m said that they do not currently export and 7% are looking to do so within the next five years. This reluctance to expand overseas comes despite recent indicators showing that firms are more bullish about the UK economy with business confidence reaching a 22-year high according to Lloyd’s Business in Britain report in July.
Just under 17% of firms stated that selling overseas is one of their top three business objectives for the next 12 months. Meanwhile, 43% of firms said that focusing on growing their UK market is their top priority and 60% of firms are focused on increasing turnover.
A third of businesses said that they are focusing on reducing their costs (38%) and a similar number are aiming to increase productivity (34%) – an indication that firms are focusing on their own performance before looking at exporting opportunities. The figures were similar when respondents were asked for their objectives for the next 10 years or the next 12 months.
Nevertheless, businesses are aware of the benefits of exports. Fully 73% said that the main advantages of overseas trade were expanding their customer base while 77% linked it to increasing sales and profit.
“Although business confidence has reached a record high, mid-sized firms often appear to be overlooking the benefits of exporting,” said Tim Hinton, Managing Director for SME and Mid-markets Banking at Lloyds Bank said. “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 from 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 the mid-market businesses that do export, continental Europe and the US dominate current export markets. Two fifths of firms (40%) stated Germany as being in their top three export markets by sales volume, followed by France (33%) and the US (26%).
When asked which countries businesses are targeting for future expansion over the next 10 years, China was at the top of the list (14%). Surprisingly there was only one other emerging economy in the top five being Brazil (5%). The more established export markets of the US (9%), Germany (6%) and France (6%) took the other positions.
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