Small business, big world: Ways to boost UK small business exports

SUMMARY

• Small and medium-sized enterprises (SMEs), which account for 99% of the UK’s businesses, and half of private sector output, could and should play a vital role in improving the country’s growth rate – through exporting.
• We demonstrated in our 2022 report Just a click away that increasing the number of SMEs which export goods by 70,000, could add £9.3 billion a year to national income and create 152,000 new jobs.
• Evidence from other comparable countries shows that this is possible. In Canada for example, 12.1% of Canadian SMEs
  are estimated to export. This figure was up from 10.4% in 2011.
• SMF has partnered with the E-Commerce Trade Commission, a body advising the Department for Business and Trade on how to encourage and support small businesses to trade internationally online, to identify how the UK can increase the number of small businesses that export goods by 70,000.
• The opportunities for making SME exporting easier through trade tech:
  • Over half of  small businesses that were seriously considering exporting (“considerers”) goods thought trade tech would make a difference to their decision to start exporting. Specifically, “considerers” expect that e-commerce platforms (77%), digital payment systems (73%), and 5G (70%) are the kinds of trade tech most likely to make a positive difference to their plans to start exporting in the next two years.
  • Around half (49%) of existing exporters said that they expected digital payments to make a “significant positive difference” to exporting over the next five years.
  • However, cost and understanding how best to utilise the tech, as well as adoption of trade tech among the agents an SME deals with were cited as key barriers.
• The potential of emerging markets as a source of future export growth for SMEs
  • For emerging market “considerers” which are already exporting to developed economies, interest in such places was driven by the prospect of untapped customers for the kinds of products they sell (25%) and evidence of existing demand for the products they offer, which they believe they can win a share of (25%).
  • However, barriers include external obstacles such as customs, demand conditions, regulatory complexity and risks associated with the transportation of products to customers in emerging markets, as well as payment reliability and the existence and strength of relationships with in-country partners.
• There is considerable scope for expanding the number of female-led exporting firms:
  • Our survey found that 86% of female business leaders in ecommerce SMEs experienced at least one “additional challenge” which impacted their business activities. More specifically, nearly four in ten (39%) female senior decision-makers in SMEs reported that fear of failure and struggling to balance family obligations had affected their ability to succeed in business. The third most
    frequently reported “additional challenge”, was access to finance (34%).
  • Trade tech could play a key role in increasing the numbers of female-led small businesses that export.

RECOMMENDATIONS

1. The government should integrate the planned industrial strategy, with the similarly expected trade strategy, into a single effort, to reflect the complementarities between general business competitiveness and exporting success.
2. The numerous sources of official guidance available to SMEs about exporting (e.g. that produced by DBT and HMRC) should be brought together, alongside consolidated access to the high-quality sources of advice and support that are available from the private and third sectors, into a single hub.
3. The government should encourage the adoption and intensification of the use of trade tech by SME “considerers” and exporters through boosting the amount of digital advice made available through DBT export support services and introducing grant funding for investment in trade tech for up to 70,000 “considerers”.
4. The integrated industrial and trade strategy should include plans to further develop and embed the use of technology across those parts of the trade process where it has influence. To develop further and embed more deeply the use of trade tech amongst SMEs that export or have export potential.
5. The integrated industrial and trade strategy should include a plan for seizing the opportunities presented by the growth in emerging markets.
6. The proposed integrated industrial and trade strategy should aim to increase the number of UK female-owned goods selling SMEs which export. Specifically, to help achieve the ambition.