Nearly three in five (59%) of Britain’s small to medium enterprises (SMEs) regard Germany as the most important trading partner for the UK economy, according to business funder Bibby Financial Services.
The firm’s latest SME Confidence Tracker shows the world’s two largest economies are ranked next, with 51% naming the US and 32% China as the countries outside the European Union (EU) that they regard as most important. This is despite the UK government’s ambitions to forge trading relationships with new overseas partners.
While 59% of SMEs named Germany as the most important country inside the EU for the UK’s trade trade ties, only 9% believe that the French economy should be a priority for prime minister Theresa May and her team. Fewer still think that Ireland, Spain, The Netherlands, Italy, Poland and Belgium (1%) are key to the UK’s economic prosperity.
“Now it is almost certain that the UK will be leaving the single market, the future of its trading relationship with countries within the EU is more uncertain than ever,” said Steve Box, international chief executive officer (CEO) at Bibby Financial Services.
“It is no surprise that the government is looking to build new trading relationships outside of the EU and beyond traditional partnerships. However, as many SMEs have little experience exporting outside of the EU, they are drawn to doing business in markets where there is already high demand for goods branded ‘Made in Britain’.”
Discussions to establish post-Brexit trade deals already underway and the aspirations of the UK government to build trade links with countries such as Australia, Canada and New Zealand are evident. Yet the firm notes that the UK’s SME community clearly have reservations over the importance and priority of securing trade with such countries.
“It is clear that Germany remains a key market for UK businesses both in relation to imports and exports,” said Box.
“The UK has long standing and strong historical ties with the US while China has long been seen as the driver of future growth for the global economy. China’s value as a trading partner to the UK is likely to grow even further following the new weekly freight train transporting goods between the two countries. The service, which launched this month, provides significant trading opportunities for both countries.
“Outside of traditional partnerships, however, many SMEs will be reluctant to spread their wings to new markets until there is clarity over the progress of such trade agreements and the potential opportunities for their businesses. Until such time, SMEs will continue to focus their efforts on markets they are familiar with. For this reason, it is key that the Government is able to set out its stall and detail a plan sooner rather than later.”
Other findings from latest Confidence Tracker show falling investment levels and increasing concern over rising costs among UK SMEs.
Over the next three months, only 13% of businesses plan to invest in exporting. Over a quarter (28%) said that they were holding off on business investment due to concerns about the UK economy, with 22% not investing due to concerns about the wider EU economy.
“SMEs that export are more likely to grow and thrive,” said Box. “It is important that we offer support and encouragement to such businesses to enable them to take advantage of overseas opportunities while there is still much uncertainty in the economy.”
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