SME trade a hidden jewel for UK's export sector
The global pandemic wrought havoc on the UK economy in 2020, leaving business leaders and government officials looking for opportunities to shore up the nation’s ailing financial status. According to new research, export trade among small and mid-sized enterprises could inject an extra £290 billion to the UK each year.
The UK's economy shrank by a record 9.9% in 2020, with continued coronavirus restrictions hampering much of the economic recovery many experts had hoped for in the apparent ‘post-pandemic’ landscape of the year’s final quarter. Despite this, and the UK’s final withdrawal from the European Union, however, the UK’s exports market still managed to grow by £0.7 billion.
While that figure is still dwarfed by the nation’s imports of £11.6 billion, the fact the UK’s exports grew at all in such uncertain circumstances suggests there is potential which might be built on in the coming years. Indeed, according to a new study from Sage and Capital Economics – part of FTI Consulting – as Britain looks to redefine its economy in the wake of the pandemic and Brexit, under-used exports from small and mid-sized enterprises (SMEs) could play a key role.
According to the researchers, 375,000 UK SMEs have exportable goods but are not currently doing so. If the UK were to facilitate international trade with these firms, however, it could unlock an annual £290 billion in the economy through a rise in export revenues. That upper figure would be almost half the value of the trade agreement between the UK and EU – helping the nation stabilise its economy in the lean years ahead.
While reaching that status may be easier said than done, SMEs are already beginning to open up to international trade. The study found that the response to the economic effects of Covid-19 means many SMEs have turned to cross-border trade, with 67% of SMEs either taking or considering measures to increase their revenue through exports in new markets. At the same time, a wave of accelerated digitisation is helping simplify access to new markets and reduce trade complexity.
Paul Struthers, Managing Director, UK and Ireland at Sage, explained, “This is a once-in-a-generation opportunity to accelerate the performance and reach of the UK’s economic backbone. Navigating through a third national lockdown, SMEs continue to diversify, digitise and look to new markets. All of which will generate new jobs and power a strong recovery.”
The process of SMEs diversifying for global trade could also be a major opportunity for addressing mounting unemployment in the UK. The analysts claim that unlocking just 10% of SME export potential could add £29 billion per year to export revenues, supporting around 215,000 direct jobs and 50,000 additional jobs in the professional and scientific sectors alone. This could also stimulate further lucrative developments elsewhere in the economy, with the sectors with the greatest opportunity to grow export sales coming in information and communication, agriculture and manufacturing as well as professional and scientific services.
Struthers added, “We are at a major turning point for the UK economy on the global stage, but we need to move quickly to give SMEs the confidence to capitalise on the trading opportunities after Brexit – incentivising digitisation to give businesses the platforms to serve customers across the globe.”
In order to facilitate these developments, Sage is calling for the Government to introduce a new SME Trader Support Service, which will support SMEs’ appetite to trade and build business confidence to export. Additional measures the Government could introduce include providing financial incentives to adopt new tech tools, expanding digital adoption among the business community and building resilience into the fragile recovery.
Stimulating investment in technology in particular is something which the researchers contend would help more than 50% of SMEs access new international markets – as the application of digital technology helps businesses looking to export. For example, e-commerce and digital marketing platforms enable SMEs to reach new customers overseas and accountancy software platforms reduce complexities when invoicing in multiple currencies.
