Delivering the UK
export ambition
November 2013
Figure 1: Share of UK goods and services trade 1990-2012
Source: United Nations Conference on Trade and Development Statistics: Value of trade
Total trade ($ billion)
Goods
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Figure 2: UK historical balance of trade 1970-2012
Source: Office for National Statistics (2013), The Pink Book: 2013 edition
Trade in services
£ billion
Total trade
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Contents
Foreword2
Figure 3: Value and share of UK service exports 2012
Source: United Nations Conference on Trade and
Development Statistics: Value and share of world trade
Reform comment
3
1
The UK is a strong global exporter but
Government targets are unlikely to be met
4
2
Export support from Government is wide
ranging but with limited impact
9
3
SMEs seek support and advice from
business networks, not Government
14
4
UK businesses need to foster ambition
to drive UK export performance
18
5
Gaining access to markets is key to
reaching export potential
26
Appendix: Global export benchmarking
35
10.8%
4.1%
$3.9bn
1.3%
$37.2bn
13.1%
7.5%
$85.4bn
30.1%
UK share of
world exports
$36.6bn
12.9%
Share of UK
service exports
3.3%
$3.6bn
1.2%
4.7%
$11.6bn
4.1%
$11.3bn
4%
$2.4bn
0.8%
$14.4bn
5%
Transport
10.4%
$18.8bn
6.6%
Travel
Government services
Communications
2.1%
$57.9bn
20.4%
3.9%
Construction
18.7%
Insurance
Financial services
5.4%
Computer and information
Royalties and licence fees
Other business services
Personal, cultural and
recreational services
19.1%
1
Delivering the UK export ambition / Foreword
Foreword
The power of exporting to drive growth is one of the few absolute certainties in business. Every
day, Barclays sees examples of customers’ prospects being transformed through access to
new markets.
The UK economy is both incredibly innovative and deeply competitive, and much of that innovation
comes from smaller and medium-sized businesses. It is also a mature economy experiencing a
period of lower growth, and the environment can be challenging for new businesses striving to
gain a foothold.
Antony Jenkins
Group Chief
Executive,
Barclays
The opportunity to reach new customers overseas can offer businesses a huge boost. As so
many of our most successful businesses have discovered, there are large and fast-growing
markets elsewhere for a wide range of products, whether high specification manufacturing, luxury
goods or professional services.
The UK has a remarkable set of advantages; our language, our system of law, our historical
relationship with many of the new economies. Even our time zone works in our favour. But it is
clear that many businesses feel unable to justify the risk that pitching overseas could represent.
The barrier is even more significant for smaller businesses. Leaders often feel they cannot take
time away from day to day operations to spend time in new markets, and the fear that a failure
could put the business itself in jeopardy is very real. At Barclays we have made significant strides
to help customers begin this journey, whether through exports skills seminars for smaller
businesses, developing specialist export finance teams, or increasingly by lowering costs for
businesses through deploying technology like video conferencing.
There is always room for improvement. This report by Reform is an important statement that export
policy is as fundamental to creating sustainable growth in the economy as access to finance or
regulatory simplification. Its message to Government and larger companies is clear: supporting
access to new markets must be a fundamental goal of interventions on behalf of UK business.
Our experience is that once a business has begun to export they rarely look back. I hope this
report will encourage all parties to think about how to help them make the first step.
2
Delivering the UK export ambition / Reform comment
Reform comment
Business investment and export growth will be key drivers of economic growth in the next decade.
Both the UK and the USA, for example, have set the target to double the value of total exports in
the near future. During summer 2013, Reform held a series of events which considered what
Government and businesses should do to grow exports and where businesses should go next.
Andrew Haldenby
Director, Reform
The outlook for exports is optimistic. The UK is still a top ten exporter, and “Brand Britain” has
strong currency. With the rapidly growing middle-classes of China and the ASEAN tiger economies,
there is projected to be an ever-increasing demand for UK luxury goods as well as UK services
such as education, financial and legal services, and the creative industries. Yet UK businesses
and Government cannot rest on their laurels. The UK needs to double its rate of export growth if
it is to meet the target of doubling the value of exports by 2020.
It is businesses, and not Governments, who export. In some areas, Government is making a real
difference to UK exporters. For example, the focus on commercial diplomacy in the Foreign and
Commonwealth Office has led to a forensic focus on target markets for British businesses, leading
more businesses to new market opportunities. And UK Trade and Investment (UKTI) support is
well regarded by those businesses that have used its services, particularly in high growth and
innovative sectors. Yet according to the Department for Business, Innovation and Skills Small
Business Survey, the number of SMEs exporting has actually fallen since 2010.
Lauren Thorpe
Research &
Corporate
Partnership
Director, Reform
Clare Fraser
Researcher,
Reform
The numbers of businesses choosing to export is low. Businesses need confidence if they are
going to export and the patchwork quilt of support is perceived as fragmented and poorly
signposted. Government intervention must be more focused and targeted in the areas that can
really make a difference, such as through strengthening the general business environment and
providing access to markets overseas through commercial diplomacy.
The private sector must pull its weight too. New research commissioned for this report shows that
SMEs are much more likely to seek information and advice from their professional advisers, their own
business contacts and their banks than from government agencies. Large exporters often cite that they
provide support and advice for companies in their supply chain. Banks are reaching out to their business
banking customers, providing access to bank-led trade missions in addition to access to finance. This
network of support, however, entirely depends on SMEs’ own ambition, entrepreneurship and bravery.
This requires a strong business environment which encourages SMEs to thrive, including in areas
such as tax and regulation. Yet other factors are important too. In its favour, the UK is internationally
renowned as a crucible for business and innovation, with a position at the top of the “soft power”
league table. Yet the UK must be better connected to the world. There are no direct flights to
Jakarta or Bogotá, for instance, making it harder for businesses to get to emerging markets. A
striking lesson from countries such as Singapore is one of greater integration. The ASEAN
countries are becoming increasingly interlinked, acting as a single free trade area and developing
a network of 19 Free Trade Agreements with major trading partners.
The Minister for Trade and Investment is right to emphasise that growing UK exports is a marathon
and not a sprint. As can be observed from experiences overseas, these things take time. Australia
began the process two decades ago, and is reaping the rewards now. Singapore took many
decades to move up the value chain. As the foundations of global trade continue to shift under our
feet, it is important to constantly keep pace with new opportunities. As new markets constantly
develop and change, some exporting pioneers are showing what can be done in expanding into
new markets. This has to become the norm. This requires a strong effort from Government in
commercial diplomacy, forging links in new countries and identifying new trading partners. It needs
banks and business support bodies to help scaffold some of the work that SMEs need to do. Most
importantly of all, it requires businesses to take risks and develop the ambition to grow overseas.
3
1
The UK is a strong global
exporter but Government
targets are unlikely to be met
4
Delivering the UK export ambition
The UK is the sixth largest economy1 and sixth largest exporter in the world.2 As part of “The
National Challenge: Exporting for Growth”, the Government articulated two over-arching targets:
>In 2011, the Prime Minister David Cameron MP first set the terms of the Export
Challenge, saying that, “Increasing the number of SMEs that sell overseas by 100,000
has the potential to add £30 billion to the UK economy. In other words, if we boost the
number that export from around one in five to over one in four we could pretty much
wipe out the trade deficit.”3
>In his 2012 Budget, the Chancellor of the Exchequer George Osborne MP made a
further pledge to “double our nation’s exports to one trillion pounds this decade.”4
Export growth must double to meet key target
The target of doubling the value of UK exports to £1 trillion by 2020 equates to an average annual
increase of around £63 billion per year between 2012 and 2020, or a compound annual growth
rate of 9 per cent. To put this into context, the average annual rate of growth in total exports from
2000 to 2012 was 5 per cent (an average annual increase of just under £19 billion per year).
Figure 4: Total annual UK exports of goods and services
Source: Office for National Statistics (2013), The Pink Book: 2013 edition
Total exports in £ billion
1000
900
800
700
600
500
400
300
200
100
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
0
Yet trends suggest business exporting is falling, not rising
The 2012 Department for Business, Innovation and Skills Small Business Survey suggests that
the number of SMEs who export is falling. 19 per cent of small businesses are categorised as
exporters (down from 24 per cent before the Financial Crisis). Other surveys suggest current
levels of 15 per cent5 and 21 per cent.6 This is below the EU average of 25 per cent.7
1
2
3
4
5
6
7
World Bank website (2012), National Accounts data, http://datacatalog.worldbank.org/. Accessed November 2013.
United Nations Conference on Trade and Development Statistics: Global export rankings, 2013.
Rt Hon David Cameron MP (2011), “Prime Minister’s speech on exporting and growth”, 10 November.
Rt Hon George Osborne MP (2012), “Budget 2012”, 21 March.
Department for Business, Innovation & Skills (2012), UK innovation survey 2011.
European Commission (2010), Internationalisation of EU SMEs, Final Report.
UK Trade and Investment (2011), Britain Open for Business.
5
Delivering the UK export ambition
Figure 5: Percentage of total SMEs are estimated to export
Source: Department for Business, Innovation and Skills (2013), Small Business Survey
2012; Reform calculations
Percentage of SMEs that export
25
20
15
10
5
0
2006/07
2007/08
2010
2012
Target
However measuring the number of exporters is a poor target. The aim to increase the number of
companies exporting by 100,000 by 2020 is arbitrary as there is no definitive baseline. The Office
for National Statistics Annual Business Survey estimates that there were 201,200 UK businesses
exporting in 2011 (10.5 per cent of all SMEs).8 The 2012 Department for Business, Innovation and
Skills Small Business Survey suggests a much higher number of SME exporters at around
230,000 businesses, and a much larger number of sole traders who export.9 The differences are
a result of both figures being based on business surveys, which use different sector bases and
samples.10 The significant differences in both data sets into question the effectiveness of a target
on the number of businesses exporting.
8 Office for National Statistics (2013), Annual Business Survey 2011.
9 Department for Business, Innovation and Skills (2013) Small Business Survey 2012.
10 For example, the ONS data set does not include the Financial Services and Insurance industries (which
represent 12.4 per cent of exports), or the majority of the agricultural sector. It also does not include businesses
that are not registered for PAYE or VAT.
6
Delivering the UK export ambition
Doubling exports: the role of the Foreign and
Commonwealth Office
The Chancellor’s challenge to double
exports to £1 trillion by 2020 is a central
strand of the Government’s drive to
rebalance the economy and deliver
sustainable growth. The Foreign and
Commonwealth Office (FCO), and other
departments including UKTI and BIS, all
have critical roles to play if this ambitious
target is to be met.
Sir Simon Fraser
Permanent Under
Secretary and Head
of the Diplomatic
Service, Foreign and
Commonwealth Office
Over the past two years we have put
commercial and economic diplomacy at the
heart of the FCO. We have taken steps to
strengthen commercial skills at all levels. We
have adjusted our overseas representation
to allow us to reinforce and open new
missions in many of the fastest growing
markets. We have trained 800 staff with the
skills to deliver our commercial priorities.
We are partnering with the private sector to
allow Heads of Missions to spend time in
business before they take up their jobs
overseas. In May 2011 we launched the
Charter for Business which, for the first
time, set out a range of FCO commitments
to business.
With UKTI we are also delivering a number
of ambitious initiatives across the globe.
The High Value Opportunities programme
aims to assist UK businesses secure £10
billion of major projects in key emerging
markets. We have appointed eight new
trade envoys to champion opportunities for
British business, and launched a multimillion pound project aimed at
strengthening overseas chambers and
business networks to provide vital support
for UK SMEs looking to export in a number
of key emerging markets. Our Posts are also
promoting Britain through the ‘GREAT
campaign’ - a visually powerful campaign
that is making real strides in promoting the
UK as a modern innovative country in which
to do business.
But this is only a small part of the picture.
UK economic success depends upon
having the right policies across government
and strong global conditions for trade and
growth. We are pushing hard to open
markets, promote free trade, support
pro-growth policies and counter risks to
economic stability. This approach lies
behind our G8 agenda on tax, trade and
transparency, and underpins our on-going
work to deliver an ambitious EU-US trade
deal that could ultimately be worth £10
billion to the UK and £100 billion to the EU.
Are we succeeding? Export volumes in 2012
were flat, reflecting weak global demand and
recession in the Eurozone. But figures so far
this year are more encouraging. Total UK
exports of goods and service in the year to
July were almost 2 per cent higher than the
same period last year, UK goods exports
grew by marginally less – although UK goods
exports to China grew by an impressive 15
per cent over the same period. But there
remains a long road to travel. As Lord Green
the Minister for Trade is keen to emphasise:
this is a marathon not a sprint. We intend to
stay in the race to the end.
7
Delivering the UK export ambition
UK television exports: a great British
success story
British television programme makers have
been creative leaders for as long as
television has existed. But as the TV
industry has matured, business ingenuity
has developed to complement the creative
instincts. From Steptoe and Son (the first
UK television format export) to Who Wants
To Be A Millionaire, British television is now
a prize commodity all over the world.
John McVay
Chief Executive,
Producers Alliance
for Cinema and
Television (Pact)
Within the TV ecosystem, the growth and
strength of the UK’s independent sector is a
great British success story. Ten years ago
the sector was an influential creative hub,
but business-wise it was a cottage industry.
Since 2003, the indie sector has almost
doubled in value. The most recent figures
show a sector worth £2.8 billion. Last year,
those independent companies produced
more hours of TV content than all of the
BBC channels combined. Export sales of all
UK television now accounts for revenues of
£1.224 billion.11
The indie sector growth story is a
remarkable success, but the exports
development is even more extraordinary.
Nine years ago the international market for
independent UK television content was
recorded at £216 million. In 2012 it was
worth £838 million.12
Legislation and the right regulatory
framework have played their part. The
Communications Act 2003 has enabled UK
independent production companies. Since
the Act came into force, rights and
intellectual property ownership has set the
UK independent production sector apart
from its counterparts all over the world.
11 Pact and UKTI (2013), Television Exports Report.
12 Pact (2013), Annual financial census and survey.
8
UK television exports increased year-on-year
through the global economic recession.
While terrestrial spending by the public
service broadcasters was reduced, the indies
looked overseas for new markets. Strong
programmes for UK audiences have
underpinned this growth and the subsequent
demand from international markets. The
American market is now worth £475 million
and is the UK’s biggest market, accounting
for more than a third of revenues from all UK
television exports. This market grew by 11
per cent between 2011 and 2012.
Major year-on-year growth areas in Pact’s
2013 exports report (considering 2012
sales) were China, India and the Middle
East. Latin America and South East Asia
also showed strong increases in sales.
Sales to China (£12 million) increased by 90
per cent in 2012. Australasia remains the
second largest market for UK exports with
sales at just over £100 million in 2012.
Pact has achieved an elite status among the
UKTI accredited trade organisations and with
UKTI support it will organise more than 200
companies’ attendance at markets in 2013.
Delivering the UK export ambition
2
Export support from
Government is wide ranging
but with limited impact
9
Delivering the UK export ambition
UK Trade and Investment success
Over three quarters of businesses that have used UKTI services have been satisfied with the guidance
and support that they have received13 and the service offered is widely considered to have improved
in recent years. SMEs that have used UKTI support cite an average estimated monetary benefit to
their business of £257,000.14 61 per cent of businesses surveyed cite UKTI as supporting them in
overcoming barriers, 48 per cent believe the support has helped them to enter new markets, and 34
per cent say they have innovated more having used UKTI services.
UKTI has a target to assist 50,000 small and medium sized businesses a year by 2015, more than
double its current level of assistance of 20,000.15 Yet UKTI does not have the capacity to
significantly increase the scale of its support.
Figure 6: Number of SMEs that UKTI aims to assist annually
Source: Department for Business Innovation and Skills (2012), The Trade and Investment
for Growth White Paper: Progress and Achievements in Year One
Number of SMEs supported
50,000
40,000
30,000
20,000
10,000
0
2012
2013
2014
2015
A web of Government support
The landscape of Government support for SMEs is complex to navigate, which means that takeup of these schemes is low. Only 50 per cent of small business exporters are aware of the support
offered by UKTI, and only 19 per cent have accessed their services. There is also significant
variation in the use of Government-funded business support services across the UK.
Although the recipients of UKTI and UKEF support consider the schemes to be effective, the
number of SMEs which these programmes manage to reach is still small. For example, though
UKEF is the Government’s primary funding source for small businesses, most support is in fact
delivered to large exporters in the Defence, Aerospace and Civil industries.16 While it provided
£4.3 billion in support to British businesses in 2012-1317 it supports less than 1 per cent of British
exports overall, and only 13 per cent of SMEs are aware of its services. 18
There is also significant variation in the level of support according to region. Almost twice as many
businesses in the North East, Yorkshire and Humber did not seek any advice in the last 12 months
as in Greater London.19
13UKTI Performance & Impact Monitoring Survey (2013), “PIMS Position at Q1 FY 2013/14 Summary Results (PIMS
28-31) (Part 4)”.
14UKTI Performance & Impact Monitoring Survey (2012), “Pims 24-27 Report (Part 2)”.
15However, this input measure only monitors the number of businesses initially contacted, and not the number who
export.
16House of Lords Select Committee on Small and Medium Sized Enterprises (2013), Roads to Success: SME Exports.
17 UK Export Finance (2013), “UK Export Finance support to British exporters at a 12-year high”, Press Release.
18 APPG on International Corporate Responsibility (2012), Exploring the tension between trade and responsibility.
19 BDRC SME Omnibus Survey, research conducted for Barclays Business Banking, Jul-Aug 2013.
10
Delivering
Figure 7: System of Government
supportthe UK export ambition / Chapter title
Source: UKTI (2011), Britain Open for Business; HM Treasury and BIS (2011), The plan for growth; HMRC (2012),
Business plan 2012-15; FCO (2011), Charter for business
Targets
High Value Opportunities
Intensive support for 76
overseas procurement
contracts valued at £250
million or more
DH
Department of
Health
International Education
Strategy
Healthcare UK
Secure £3 billion in high value
overseas education contracts
by 2020
Boost the profile of the
UK health sector overseas
MOD
Ministry of
Defence
Decrease net migration to
100,000 a year by the end
of the next Parliament
Home Office
Double DfID’s investment in
higher education partnerships
UKTI
UK Trade &
Investment
Passport to Export
Increase the number
of SMEs exporting by
100,000 by 2020
Double the value of
UK exports to £1 trillion
by 2020
Overseas Marketing
Introduction Service
National Export Week
Tradeshow Access
Programme
Export support team
Business Bank
Supporting finance for
SMEs with £1 billion of
new Government capital
and £2.9billion of existing
capital alongside private
sector contributions
Fully operational by
Autumn 2014
National Export
Challenge
Export Marketing
Research Scheme
Inititatives
Defence and Security
Organisation
Increase the number of overseas
students by 90,000 by 2018
Gateway to global growth
Departments
BIS
Department
for Business,
Innovation
& Skills
Coaching for Growth
Programme
Coaching and support
for high growth potential
SMEs
Britain Open for Business
Business Opportunities
Service
The Plan for Growth
Give assistance to 50,000
businesses by 2014-15
UKEF
UK Export
Finance
3 new trade finance
products:
Bond Support Scheme
Export Working Capital
Scheme
Foreign Exchange
Credit Support Scheme
Charter for Business
Overseas Security
Information for Business
Equip staff with necessary skills
FCO
Foreign &
Commonwealth
Office
Prioritise supporting businesses
abroad
HMT
HM Treasury
Support commercial and economic
interests within foreign policy
HMRC Business Plan 2012-15
Overseas Business Risk
Service
Double SME education activity
within HMRC by 2015
2 new departments:
Reduce the annual cost of
business administration by £250
million by 2015
Economics Unit
Commercial and
Economic Diplomacy
Department
11
HMRC
HM Revenue
& Customs
Give all SMEs access to their tax
documents online by 2015
11
Delivering the UK export ambition
In one case, targets set by different departments are uncoordinated and have conflicting
outcomes. The Home Office visa restrictions and immigration targets undermine the ability of
UKTI and BIS to reach their target of 90,000 overseas students by 2018.
Targeting support limits coverage
UKTI’s export strategy aims to “rebalance the economy” through targeting high-growth and
innovative sectors which it hopes will contribute the most the nation’s economy over the coming
decades. UKTI has identified 18 “priority sectors” in which to target its efforts. As a result, some
SMEs will receive more access to support than those in other sectors and regions.
Table 1: Government priority sectors
Source: UKTI (2011), Britain Open for Business
Advanced
manufacturing
Defence and
security
Infrastructure
Healthcare and
life sciences
Services
Aerospace
Agrifood
Automotive
Chemicals
Energy
Defence
Security
Construction
Environment and
water
Transport
(airports, marine,
ports, railways)
Healthcare
Industrial
biotechnology
Pharmaceuticals
and medical
biotechnology
Creative
industries
Education, skills
and training
Financial services
Professional and
business services
Retail
Technology
Low carbon
12
Delivering the UK export ambition
Where
Case study
next? Growing the UK export market
Title of case study here
It is ironic that a seafaring nation with a
great trading history should find itself
coming from behind in the competition for
the new growth markets of the world. But
that is the situation in which we find
ourselves, for reasons that are rooted in
the post empire blues and decline of
manufacturing that characterised the
second half of the twentieth century.
Margot James MP
Member of Parliament
for Stourbridge
and Chair, All Party
Parliamentary Group for
Trade and Investment
Fortunately during that time the UK’s service
sector grew exponentially and we can look to
that sector for continued and improved
growth in exports. There is of course a superb
advanced technology and manufacturing
sector that is coming back to full strength, and
is clearly benefiting from this government’s
strategy of re-balancing the economy towards
manufacturing, exports and regions beyond
London and the South East.
Only this week we had the excellent news
that the stranglehold Boeing exerts over
some of the world’s aviation market was
broken by Japan Airlines signing up Airbus
for its next generation aircraft. An order
which will include Rolls Royce Trent XWB
engines manufactured in Derby,
unparalleled world class engines.
Britain’s exports have at last shown
encouraging signs with an overall increase of
3.6 per cent, the best upturn since 2011.
What the headline figures mask is just how
much better exports are to markets outside
the EU. Food and drink exports to China for
the past year are up 126 per cent, and to
South Africa and Hong Kong, up 25 per cent.
We can and should be doing both of course.
British exports to other EU member states
still account for 50 per cent of total exports.
Whilst we need to build our presence in the
newer growing economies of the world it
would be insane to back pedal on our core
markets. Many companies who are starting
to export prefer to start closer to home
anyway; before they reach out to the Brazils
and the Indonesias.
This year, the completion of the Free Trade
Agreement with South Korea and the start
of negotiations with the US for a
Transatlantic Trade and Investment
Partnership deal will provide huge
opportunities for British business through
our membership of the EU.
Government policy, manifested by the
support for exporters from UKTI and UKEF,
must continue to focus on companies
exporting to the growth markets. One thing
we must do is to ensure that these markets
are assessed individually. The markets of
South East Asia for example are as different
from each other as are the markets of the EU.
The tailored support available from the
combined forces of UKTI, the Foreign Office
and overseas British Chambers of
Commerce in countries like Indonesia,
Turkey, Nigeria and many more will help
companies decide how to build their global
presence market by market.
13
Delivering the UK export ambition
3
Title
SMEs seek support and
advice from business
networks, not Government
Author’s Name
Author Title here
14
Delivering the UK export ambition
While there is broad ranging and far reaching government support for increasing UK business’
export potential, businesses are more likely to seek support from business networks. Findings from
a new survey conducted by Barclays Business Banking in July and August 2013 showed that in the
last 12 months, the most likely source of advice for SMEs was an accountant. The second most
likely place that SMEs would go for advice is a bank. Only 12 per cent of businesses cite the use of
Government-funded services in the last 12 months.20 Other surveys offer similar findings.21
Businesses in the manufacturing sector are least likely to seek advice from business networks
and government-funded services (both 11 per cent), while 19 per cent of service sector businesses
accessed advice from business networks and 17 per cent sought information via governmentfunded services.
Small businesses with turnover between £50,000 and £100,000 were least likely to seek advice
from government-funded services (7 per cent), and businesses with turnover of £250,000 to
£500,000 most likely to (24 per cent).
Table 2: Where SMEs sought information and advice in the last 12 months
Source: BDRC SME Omnibus Survey, research conducted for Barclays Business Banking,
Jul-Aug 2013
SME Employers
(per cent)
Accountant
Customers, suppliers and other business people
Bank
Family and friends
Business networks (like Chambers of Commerce, Trade Associations, CBI,
FSB, etc)
50
30
30
25
17
Government-funded services (like UKTI, Business Link, HMRC, other
government departments and web-sites, Local Enterprise Partnerships,
Business Coaching for Growth, etc)
12
Media
Other business advisors
Don’t know
None/I have not sought advice in the last 12 months
13
11
1
28
It is clear that business networks can offer an effective route to providing business with support
to export. Businesses would most like to see this support delivered through “face to face contact
with an advisor” (67 per cent), regardless of the size of the business.22
20 BDRC SME Omnibus Survey, research conducted for Barclays Business Banking, Jul-Aug 2013.
21 Department for Business, Innovation and Skills (2013), 2012 Small Business Survey – Growth Special Report.
22 BDRC SME Omnibus Survey, research conducted for Barclays Business Banking, Jul-Aug 2013.
15
Delivering the UK export ambition
Accountants
Chartered accountants and small practices deliver business advice to over 1.5 million businesses
in the UK.23 As the main source of advice for SMEs they are well placed to provide export advice
and signposting.
Banks
While banks have faced criticism from Government over the accessibility of available finance for
businesses to fund exports24, they are one of the first places that SMEs look to for help and
advice. It is not clear whether lack of access to lending or lack of appetite for borrowing is the
cause of low figures for small business lending.25
Moreover, banks are uniquely places to offer support on exporting. To quote one recent study, if
a bank is “very knowledgeable about overseas business opportunities either through its own
banking activities or transactions with client firms with experience in exporting, potential exporter
firms would find it helpful to consult with such a bank.”26 Increasingly, high street business banks
are able to offer advice and services to small businesses to support exporting.
Business networks
The potential role for business networks in promoting exports is significant. Membership bodies
and business networks are able to strongly support exports and highlight successful experiences
of other members. Such organisations can also leverage their international networks to set out
potential markets and partner opportunities overseas. At the start of 2012, 40,000 were members
of the IoD, 104,000 of the BCC and 200,000 of the FSB.27
Supply chains
SMEs are a vital part of the supply chains of larger exporters. For example, there are at least
10,000 SMEs in the advanced manufacturing sector alone.28
23 Institute of Chartered Accountants in England and Wales (2012), Export Challenge: A small practice view.
24 HM Treasury and Department for Business, Innovation and Skills (2011), The Plan for Growth.
25 House of Lords Select Committee on Small and Medium Sized Enterprises (2013), Roads to Success: SME
Exports.
26 Inui, T. et al (2013), “Firms’ Export Behavior and the Role of Banks’ Overseas Information”, Economic and Social
Research Institute, Japan.
27 House of Lords Select Committee on Small and Medium Sized Enterprises (2013), Roads to Success: SME
Exports.
28 Lord Green of Hurstpierpoint (2011), SME exporting: The National Challenge, 10 November.
16
Delivering the UK export ambition
Case Study 1
Case
study
Title of case study here
Project finance is the key to the export puzzle
Biwater Holdings Ltd
Access to clean potable water and the
management of sanitation affects
everyone, everywhere. Responding to
global requirements for solutions that
solve the world’s most pressing waterrelated challenges, Biwater naturally took
to exporting its products and services
worldwide from its headquarters in
Dorking, Surrey.
Since 1968, the Biwater Group has
completed over 25,000 water projects in
over 90 countries, leading the way in the
financing, design, construction, operation
and maintenance of water and wastewater
treatment plants, in both rural and urban
environments. Furthermore, the Group has
owned and run water companies across
the world, from Chile to China, ensuring
the efficient operation of water distribution
and collector networks.
Currently, 100 per cent of the Group’s water
and wastewater projects are taking place
outside the UK. Increases in exporting
activities have gone hand-in-hand with the
growth of the company, and have had a
positive impact on turnover, allowing the
Group to attract the industry’s best
engineers and continue its development
of innovation through the research and
development of the latest technologies.
Biwater utilises the support offered by the
British Government, participating in trade
missions through its UK Trade and
Investment Division (UKTI) as well as
finance facilities open to exporters from
its UK Export Finance Division (UKEF).
Adrian White, Chairman
Biwater has gained recognition for its
innovative approaches, and has been the
recipient of the Queens Award to Industry
and for Export Achievement five times.
The company’s success lies with its
ability to implement ground-breaking
technologies and source unique financial
solutions for its clients.
Biwater’s innovative funding methods –
and unrivalled relationships with lending
institutions and export credit agencies –
provides the Group with methods of
delivering solutions to communities that
are desperate for water or sanitation
treatment; areas that previously were not
able, or could not afford, to tackle
large-scale water infrastructure projects.
17
Delivering the UK export ambition
4
UK businesses need to foster
ambition to drive UK export
performance
18
Delivering the UK export ambition
Business ambition and confidence are both crucial factors in the decision to export. Yet the number
of businesses seeking advice on exports is low. Only 4 per cent had sought advice on exporting in
the 12 months to July.29 Businesses with over 51 employees are twice as likely (6 per cent) to have
sought advice on exporting than those businesses with between two and five employees.
Table 3: Areas in which businesses have been actively seeking specialist advice or
information over the last 12 months
Source: BDRC SME Omnibus Survey, research conducted for Barclays Business Banking,
Jul-Aug 2013
SME Employers (per cent)
Accounting
Sales and marketing
Regulations and compliance
Financing
Information technologies
Manufacturing or service delivery
Education, training and skills
New product development
Environmental management
Supply chain management
Other human resources management
Exporting
Other
36
35
30
24
23
19
18
17
14
10
9
4
8
The number of businesses seeking advice on exports also varies considerably based on the size
of the business. Businesses with higher turnover are, in general, more likely to have sought export
advice in the last 12 months.
Table 4: Percentage of businesses seeking advice on exporting in the last 12 months, by turnover
Source: BDRC SME Omnibus Survey, research conducted for Barclays Business Banking,
Jul-Aug 2013
Turnover
£50,000 - 100,000
£100,000 - 250,000
£250,000 – 500,000
£500,000 – 1 million
£1 million – 5 million
£5 million – 20 million
> £20 million
SME Employers (per cent)
3
1
3
7
9
11
16
This low propensity to seek advice on exports can be explained by research suggesting that 43
per cent of companies with the potential to export “do not have a product or service suitable for
exporting.” A further 41 per cent of potential exporters do not have the appetite to export – either
“exporting is not part of the business plan” or they consider themselves to have “sufficient
business in the UK already.”
29 BDRC SME Omnibus Survey, research conducted for Barclays Business Banking, Jul-Aug 2013.
19
Delivering the UK export ambition
Figure 8: The response of potential exporters to the question “What are the barriers that
prevent your business exporting?”
Source: Mion, G. and Novy, D. (2013), “Gaining further understanding of the factors which
influence export engagement among UK SMEs”, May 2013.
24%
Exporting is not part
of the business plan
43%
17%
We have sufficient business
in the UK already
We do not have
a product or
service suitable
for exporting
16%
Other
Similar surveys offer similar findings with lack of product and a level of contentment with the current
business being most widely cited as reasons not to export. Other reasons include: “limited
knowledge of the commercial aspects of exporting”, “difficulty finding overseas customers, agents
and/or distributors” and “difficulty sourcing market information/identifying export opportunities.”30
30 British Chamber of Commerce (2013), Exporting is good for Britain but market barriers stifle opportunities.
20
Delivering the UK export ambition
The Singapore Experience
It is not possible to distil some 50 years
of constantly evolving policies behind
Singapore’s export-driven economy into
500 words or less but foolishly, I will try
to do so.
His Excellency
Mr Thambynathan
Jasudasen
High Commissioner
of Singapore
Trade is Singapore’s lifeline. We had to
import and export to survive. Unlike larger
countries that could rely on domestic
consumption to drive growth, Singapore
had to export in order to grow its GDP. We
kicked off with labour-intensive export
industries as a quick solution to our massive
unemployment problems. We stepped up
from very low to high skill industries over
five decades. This never ending quest to
move up the value chain continues even till
today. Over the decades, four key aspects
of our evolution have remained constant.
i. Horizon scanning.
Right from day one, the government played a
proactive role in identifying high-growth
industries (not just current trends, but future
growth areas) so that we remained ahead of
the curve. We moved up the value chain by
identifying successive “sunrise sectors”. One
example is our decision to invest in
biomedical skills training and draw early
investments in the biomedical sciences in the
1990s, long before it became fashionable.
Today ten leading pharmaceutical
multinational companies have regional
headquarters in Singapore as testament to
how horizon scanning has paid off.
ii. Skills Training.
Although it would have been politically
convenient, we did not aim for every child to
become a university graduate. The
Singapore government instead stressed the
importance of vocational skills training. We
set up numerous Polytechnics, as well as
the Institute of Technical Education, to
provide post-secondary vocational training.
Having a skilled workforce proved to be one
of the core strengths that attracted investors
and allowed us to export.
iii. Good Infrastructure.
Efficient sea ports, airports, broadband
networks and logistics bases are
fundamental to driving exports. Red-tape
was cut sharply to make Singapore one of
the easiest places in the world to do
business. Good infrastructure is a moving
target that has to be constantly updated to
remain ahead.
iv. Free Trade Agreements (FTAs).
Again, long before it was fashionable
Singapore embarked on a drive to broaden
its trading base through bilateral and
regional FTAs. Many were sceptical of our
approach. Step by step, we grew our
network of FTAs to include all our major
trading partners. To date, we have 18 FTAs
with our 24 economic partners including
China, Japan, the US, ASEAN, Australia and
India. Most recently, we concluded an FTA
with the European Union (EU) in December
2012. On average, Singapore’s domestic
exports of goods to an FTA partner
increased by 18 per cent two years after
entry into force of that FTA, and a further 16
per cent in the third year.
A large part of our success was due to
proactive government intervention, foresight
and luck. The Singapore government did
not shy away from making tough choices
when it came to the economy. From
identifying industries and developing the
workforce, to creating stable investment
conditions and providing attractive
infrastructure for businesses, the state has
played a major role in steering our exportsdriven growth story. The private sector, both
local and foreign, was a close partner in this
exciting enterprise.
21
Delivering the UK export ambition
Export potential index
A supportive business environment
The following export potential index indicates the relative strengths of the UK business environment
with its peers. The index is based on an matrix of the 25 countries, which appear in either or both
of the top 20 exporters for goods or services.31
Labour productivity
Exporters tend to have higher capital-to-labour ratios and increased labour productivity has been
shown to coincide with a positive change in export values.32 Both Germany and the USA
significantly outperform the UK on workforce productivity. Productivity in the UK is at $47.8 per
hour worked, Germany $57.6, and the USA $61.6.33
Innovation
Companies which are “innovative and imbued with a competitive ‘entrepreneurial spirit’ are more
likely to be successful exporters”.34 Similarly, exporting can also boost innovation.35 The UK is
particularly strong in this area, ranked third in the world behind Switzerland and Sweden.
Ease of doing business
This is a composite measure including factors such as the complexity and cost of regulatory
processes for trading, registering property and paying taxes, along with the strength of the legal
institutions for protecting investors, enforcing contracts, employing workers, etc. In the UK, there has
been some concerted effort at regulatory reform, including the “one in, two out” rule for new regulation.
The UK is ranked as seventh out of 155 countries on this measure, up from ninth in 2006.36
Total tax rate
A major strength of the UK’s business environment is a competitive rate of headline corporation
tax, which is set at 23 per cent, lower than in Germany (29.6 per cent), France (33.3 per cent) and
the USA (40 per cent).37 Corporation tax is set to fall further to 20 per cent from 2015.
Access to finance
Access to finance measures the ease of obtaining a bank loan with only a good business plan and
no collateral. It is often cited as a barrier to trade and investment. On this measure, the UK has similar
access to finance as Germany, Denmark, China and India.
Openness to trade
Trade openness is often regarded as a significant influence of economic growth. It is also used to
measure the importance of international transactions relative to domestic transactions. Hong Kong
and Singapore have the highest trade openness, illustrating that international transactions dominate
these economies. The UK’s trade openness is similar to Spain, Canada, France and Italy.
Cost to export
These include costs for documents, administrative fees for customs clearance and technical
control, customs broker fees, terminal handling charges and inland transport. UK cost to export
is approximately $950 per container, 14th amongst the top 25 export nations.
Trade and transport related infrastructure
High quality ports, road, rail and air infrastructure is crucial to supporting both domestic and
international business. Amongst the top 25 global exporters, the UK ranks 14th. Germany and
the Netherlands top the rankings, and the United States ranks fourth.
31 Please see the appendix for raw data and details on the compilation of the index.
32 Harris, R. and Moffat, J. (2011), R&D, Innovation and Exporting, SERC Discussion Paper 73.
33 OECD website (2012), StatExtracts, http://stats.oecd.org/: GDP per hour worked, current prices USD Accessed
November 2013.
34 House of Lords Select Committee on Small and Medium Sized Enterprises (2013), Roads to Success: SME Exports.
35 Federation of Small Businesses (2013), Enabling small businesses in the drive for more UK exports.
36 World Bank and International Finance Corporation (2012), Doing Business, http://www.doingbusiness.org.
Accessed November 2013.
37 CBI (2013), Raising the bar.
22
United Kingdom
Labour productivity
Trade and
transport related
infrastructure
Innovation
Ease of
doing
business
Cost to
export
Openness
to trade
Total tax rate
Access to finance
23
How the UK
compares
Low
score
High
score
USA
Labour productivity
Labour productivity
Trade and Trade and
transport related
transport related
Innovation Inno
infrastructure
infrastructure
Cost to
export
Ease of
doing
busines
Cost to
export
Labour productivity
Sweden
Trade and
transport related
infrastructure
Innovation
Openness Openness
to trade to trade
Spain
Total
Total tax rate
Access to finance
Access to finance
Labour productivity
Trade and
transport related
infrastructure
Ease of
doing
business
Cost to
export
Innovation
Openness
to trade
Ease of
doing
business
Cost to
export
Total tax rate
Access to finance
Singapore
Openness
to trade
Total tax rate
Access to finance
Japan
Germany
France
24
Delivering the UK export ambition
Case Study
2
Case
study
Title of case study here
Who are we?
Eve Taylor
Eve Taylor, originally established in 1968,
is a manufacturer and retailer of skin and
body care products used both
professionally as well as sold directly to
consumers. We are a wholly familyowned business, based in Peterborough,
currently employing 20 staff and with a
turnover of over £2,000,000 last year. We
operate all over the world, with a footprint
in Asia, Australia, Africa, Europe and
North America. Over 60 per cent of our
turnover is export-based and we are
currently experiencing growth at
approximately 20 per cent per annum,
adding more countries as export markets
in 2014 - our demand is being driven by a
need for affordable quality.
Entering the export market
Like so many small businesses, we faced
two big challenges: human resource and
financing. Moving into exports, as we did
for the first time in the mid-70s, was a
complete departure from our existing
business model. However, our founder
Eve Taylor OBE firmly believed that
international trade and export was key to
the success of the company.
Our philosophy to making it work
Now that we are well established
exporters and enjoying a good return, our
main concern is with both international
and domestic economic stability and
confidence. Also, we are finding that
exchange rate fluctuations are really
starting to impact our local distributors’
margins. Some are struggling to absorb
such fluctuations - so we are now
working hard to improve our productivity
in order to remain competitive and thus
ensure that, along with our partners, we
continue to maintain existing business
and add new customers.
The bottom line
In 2005, we decided to expand our product
range and invested significantly to improve
our reach to existing and new customers/
markets. Thanks to increased exports
following this investment we have been
able to spread the “financial load of our
recovery costs” and ensure that we remain
profitable. We have now increased our
exports from 40 per cent to 60 per cent
overall in this period. It has helped us to
create more jobs and a much more secure
future with consistent profit growth.
Support
We have often benefited from some sort
of support – such as trade show grants
– and, overall, the level of support and
services on offer has improved over the
years. We have taken advantage of
missions and intelligence data that has
been available from bodies such as UKTI
and our local chamber of commerce, but
as a seasoned exporter we are now
confident about venturing into new areas
ourselves. However, there are always
things government can do. We’d like to
see more incentives for small UK
companies to start exporting, such as tax
breaks for export sales. It would also be
good to see more investment in UK
pavilions at international trade shows
– currently the UK presence could be
much better and pales in comparison
with other countries. Ultimately, it’s about
persuading businesses to think differently
and not rely just on domestic markets for
their survival or growth.
Chris Taylor, Director
25
Delivering the UK export ambition
5
Gaining access to markets
is key to reaching export
potential
26
Delivering the UK export ambition
Fashion
Case study
and textiles – Where next?
Title of case study here
UK textile companies are used to seeking out
exotic export markets, following the inexorable
move East of global fashion production. But
what about fashion companies?
Paul Alger
Director of International
Affairs at UK Fashion &
Textile Association
UK fashion companies tend to be smaller
than their EU counterparts; design and
innovation-led and free from the stresses of
“feeding” and running a factory. They may
be leaner and more flexible, but they are
also more risk averse, preferring to
concentrate on markets and activities where
the returns come with a greater degree of
certainty. Our European competitors, on the
other hand, are better capitalised and driven
by the need to “feed” their larger offices and
factories. Faced with a downturn in sales in
the established markets, especially in
southern Europe, it is common to see many
of them at trade shows in China, Russia and
even in Kazakhstan.
The support that industry receives through
UKTI’s Tradeshow Access Programme is
much appreciated and puts companies in
front of buyers with budgets. The GREAT
Campaign in emerging markets is exciting
but we need time to prepare and reassure
smaller UK exporters that these are real
markets for them. We also need more
sector-specific trade missions to markets
with immediate potential including Japan,
Korea and Hong Kong.
Above all, everything we do has to be part
of a long-term strategy from the
Government and closely involving Trade
Associations who know and represent their
industries. Building our exports and
rebalancing our economy will be a
marathon, not a sprint!
That does not mean that our companies
are not already doing great things in China,
for example, through Hong Kong-based
groups including Lane Crawford, Joyce and
IT or in Russia through international trade
shows in Europe. The cautious UK approach
also works!
The problem remains, however, that smaller
companies struggle to make the long-term
investment needed to crack bigger
emerging markets and whilst our designers
are more talented than anything on the
catwalk in Milan, most do not have the
support of a large fashion house. Smaller
designers companies are a prime target for
Chinese Trademark Squatters, preventing
them from selling (and manufacturing) in
China, as smaller companies are less likely
to invest in IP protection. Most of the BRICs
markets have strong fashion sectors of their
own. Japan is an important shop window for
the emerging Eastern economies but is,
disappointingly, not prioritised by
Government in the same way as the higherrisk BRICs.
27
Delivering the UK export ambition
Figure 9: UK export destinations, by continent, as % of total export (2012)
Source: Office for National Statistics (ONS), UK Trade Statistics, February 2012
Europe is currently the most important market for the UK, with 54 per cent of total exports going
to the EU and 60 per cent to the whole of Europe.38 However, trade is shifting. In the period 20082011, there was a 2 per cent reduction in UK exports to the EU, whereas exports to the BRICs
increased by 16 per cent, and exports to the ASEAN countries increased by 14 per cent.39
Businesses are already taking advantage of the growth potential in these rapidly expanding
markets, although there is still a much greater absolute value exported to the EU.
Figure 9: UK export destinations, by continent, as per cent of total exports (2012)
Source: Office for National Statistics (ONS), UK Trade Statistics, February 2012
6% Europe - non EU
14% Asia
5% Middle East
2% Africa
2% Australia
2% South America
16% North America
54% Europe - EU
Businesses need access to markets
The OECD found that one of the primary barriers to the internationalisation of UK SMEs is the
inability to contact potential overseas customers.40 This is significant as export success is linked
to the ability to adapt to the opportunities presented by changing trade patterns.41 Potential
exporters are still most likely to consider exporting to countries within the EU, yet recognise that
many of the greatest opportunities for growth lie beyond European borders.42
Table 5: Markets to which potential exporters would consider exporting
Source: British Chambers of Commerce (2013), Exporting is good for Britain but market
barriers stifle opportunities
% businesses surveyed
EU
North America
Middle East and Africa
Non EU Europe (including Russia)
Australasia
Asia
Central and South America
None of these
88
49
45
44
41
40
31
2
38 ONS statistics, UK Trade statistics, February 2012.
39 International Trade Centre website (2013), “Trade Map”, http://www.trademap.org. Accessed November 2013.
40OECD (2009), “Top Barriers and Drivers to SME Internationalisation”, Report by the OECD Working Party on SMEs
and Entrepreneurship, OECD.
41 WTO Secretariat (2013), Trade Policy Review – European Union.
42 British Chamber of Commerce (2013), Exporting is good for Britain but market barriers stifle opportunities.
28
Delivering the UK export ambition
Would
Case study
leaving the EU negatively impact levels
of case study here
ofTitle
foreign
direct investment into the UK?
Foreign Direct Investment (FDI) is a crucial
factor in the internationalisation of businesses.
FDI enables SMEs to become more involved
in international business activities through
providing access to new markets and
marketing channels overseas. Furthermore,
research suggests that these firms are more
likely to innovate, which in turn improves the
likelihood of exporting.
David Ruffley MP
Member of Parliament
for Bury St Edmunds
and Member, Treasury
Select Committee
The UK has the second largest stock of FDI in
the world after the United States (£770 billion)
and EY’s 2013 European Attractiveness
Survey found that international investors
considered the UK the most attractive
location for investment in the EU. Not that this
an intra-European story – a majority of the FDI
stock in the UK (52 per cent) is the result of
inward investment from non-EU countries.
That this, often under-appreciated, success
story could be imperilled by a decision of
the UK to exit the EU is a concern raised by
some businesses and commentators. This
is a concern that should be taken seriously.
In a survey of over 2,000 multinationals
conducted by the UN Conference on Trade
and Development, the most important
criterion determining the location of FDI for
both manufacturing and service sectors was
the size of the local market. For the UK, this
is currently the European Single Market. In
its recent response to UK government’s
“Review of the Balance of Competencies
between the UK and the EU”, the Japanese
government reinforced this, explicitly stating
that the advantage of the UK as a gateway
to the European market has attracted
Japanese investment.
Even if the UK were to choose to leave the
EU, it is likely that the negotiated terms of
the exit would involve some preferential
trade deal with the remaining EU. The UK on
some (disputed) estimates runs an annual
trade in goods deficit with the EU of around
£70bn (and a surplus with the rest of the
world of £13bn). Access to the UK’s large
and lucrative market is therefore worth more
to EU companies than vice versa. It would
simply not be economically beneficial to EU
countries to increase tariffs against the UK.
In the meantime the UK may be able to
establish a regulatory regime even more
favourable to overseas investors. Crucially,
the UK would regain competence to
negotiate international agreements on FDI,
something it has not been able to do since
the Lisbon Treaty of 2009. Recent and
repeated cuts in corporation tax by the
Coalition Government demonstrate that
there is an instinctively competitive edge
to current UK business and trade policy.
The investment implications of giving this
competition a freer rein outside the EU
need to be weighed against what the
UK would have to give up to regain its
FDI independence.
.
While the Single Market is at present a net
positive in attracting FDI to the UK it is only
one of a matrix of factors, including the
integrity of the UK legal system, the
availability of particular skills and services
and the status of the English language.
Disentangling these – along with other
changes, such as the removal of capital
restrictions and the move to more capitalintensive technologies – is difficult to do.
29
Delivering the UK export ambition
Market intelligence
The 2012 Autumn Statement showed an increased focus on the market information arm of UKTI.
New funding was announced for an additional 50 international trade advisers, an additional £8
million per year for the Tradeshow Access Programme, enabling 5,000 more companies to benefit
from this scheme, and a 50 per cent discount on the Overseas Market Introduction Service for up
to 2,500 new users. However, Germany still has many more international trade advisers, 1,700 to
the UK’s 270, and spends several times that of UKTI on its own Tradeshow Access Programme.43
Moreover, this service is only available to those companies looking to start exporting, and not
those trying to expand into additional markets.44
Free Trade Agreements
Exporters to BRICs and other fast-growing economies tend to encounter the most barriers.45 It is
therefore crucial to establish Free Trade Agreements with these countries. The figure below shows
that the vast majority of Free Trade Agreements are still pending. The potential gains from a
successful conclusion are enormous. For instance, an ambitious agreement with the USA could
bring the EU economic gains of €119 billion a year, an FTA with Japan could increase EU GDP by
0.6 per cent, and an FTA with Canada could increase the value of bilateral trade between the EU
and Canada by over a third.46
The ASEAN countries are becoming increasingly interlinked, acting as a single free trade area
and developing a network of 19 Free Trade Agreements with major trading partners. As well as
the ASEAN, the Asia-Pacific Trade Agreement and the South Asian Free Trade Agreement both
operate in the South East Asian region.
43
44
45
46
30
Federation of Small Businesses (2013), Enabling small businesses in the drive for more UK exports.
CBI (2013), The only way is exports.
British Chambers of Commerce (2013), International Trade Survey 2013.
European Commission (2013), European Commission memo: The EU’s bilateral trade and investment agreements
– Where are we?
Delivering the UK export ambition
Figure 10: Free Trade Agreements between the EU and the rest of the world
Source: European Commission (2013), Overview of FTA and other trade negotiations
EU and Customs union
European Economic Area
Countries with which the EU has a
preferential trade agreement in place
Countries with which the EU negotiates or has a
preferential agreement pending official conclusion
Countries with which the EU is considering opening
preferential negotiations
Technology
Technology and e-commerce enable SMEs to overcome logistical and geographical challenges
in order to access markets. UKTI state that they will target e-connectivity services at innovative
and high-growth SMEs in order to better connect these businesses with trade finance, credit
insurance and venture capital.47 However, despite the potential advantages of new technology for
SMEs, the fixed cost of acquiring new technology may be more of a burden for SMEs than for
larger companies. SMEs may also be more susceptible to security problems, and in some cases
may be limited by broadband speeds or lack of skills to engage in e-commerce.48
47 UK Trade and Investment (2011), Britain Open for Business.
48 Daniel, E. and Myers, A. (2000), Levelling the playing field: e-commerce in SMEs, End of Award report to ESRC,
grant no. R022250168, December.
31
Delivering the UK export ambition
Many of these challenges can be easily overcome through the use of online export hubs. The
informal economy in particular is thought to contribute significantly to unrecorded exports through
export hubs such as Ebay. 49 In 2007, the UK exported £9.5 billion in e-commerce goods. It was
strongly positive in the balance of trade for e-commerce, exporting £2.80 for every £1 imported.
Since then, the trend has accelerated. The number of overseas sales by UK SMEs processed
through Ebay reached £446 million in 2010, an increase of 128 per cent since 2007.50
Transport connectivity
Being connected to markets across the world is crucial for both attracting inward investment to
the UK and for selling more overseas. Not only do businesses need to be able to effectively
transport goods around the world, but they also need to be able to travel to overseas destinations
to meet new clients and discuss their business. Roads, railways, ports and airports are crucial to
the UKs competitiveness; yet tough decisions on new infrastructure are too often put off with the
UK spending less on capital investment in transport in recent years. Further, businesses are not
confident that UK transport infrastructure will improve in the next five years.51
Strong commercial diplomacy is crucial
In addition to providing a strong business environment, ensuring commercial diplomacy is another
area that only Government can influence.
Ministerial visits
During 2012–13, the Foreign Secretary and FCO Ministers made 168 foreign visits, 47 by the
Foreign Secretary himself. 52 The Westminster system of parliamentary duties makes it difficult for
Ministers, and in particular the Prime Minister, to be away from Westminster for extended periods
of time. This means that Britain is at a competitive disadvantage relative to countries where the
heads of state are able to make extended visits to key trading nations. In a submission to the BIS
Select Committee report on UKTI, the Middle East Association noted that “Arab governments
frequently complain of British neglect and compare it to the attentions of competitor governments”.53
British Trade Ambassadors
Launched in October 2008, this network of business and academic leaders seek to promote UK
trade internationally. Although this is an important bolster to the work of Ministers, the BIS Select
Committee identified a knowledge gap in the life sciences and health sector, which was identified
by UKTI as a priority area in their 5-year plan.54
Trade envoys
In December 2012, the Prime Minister announced the creation of eight Trade Envoys, covering
between them 14 states. These countries however vary significantly from UKTI target markets; of
the 18 countries identified by UKTI as “key emerging markets”, only 4 have dedicated trade
envoys.55 Although Rt Hon Ken Clarke MP, the Prime Minister’s roving trade envoy, has a specific
focus upon China and Brazil, this still leaves a large number of states unreached.
49 H
ouse of Lords Select Committee on Small and Medium Sized Enterprises (2013), Roads to Success: SME
Exports.
50 Institute of Public Policy Research (2011), Surviving the Asian Century.
51 Confederation of British Industry (2013), Connect more: CBI/KPMG infrastructure survey 2013.
52 Foreign and Commonwealth Office (2013), Foreign and Commonwealth Office Annual report and accounts 2012-13.
53 House of Commons Business, Innovation and Skills Select Committee (2010), Exporting out of recession – Third
Report of Session 2009-10.
54 UK Trade and Investment (2011), Britain Open for Business.
55 UK Trade and Investment (2011), Britain Open for Business.
32
Delivering the UK export ambition
Table 6: UKTI priority markets compared with trade envoy destinations
Source: UKTI (2013) “High growth markets”, Press release, 26 July; BIS (2013), “New trade
envoys and business investment to boost trade links”, Press release, 12 November
UKTI priority markets
Trade envoy destinations
Indonesia
Indonesia
Mexico
Mexico
South Africa
South Africa
Vietnam
Vietnam
Brazil
Algeria
China
Azerbaijan
Colombia
Cambodia
Egypt
Jordan
India
Kazakhstan
Malaysia
Kuwait
Qatar
Laos
Russia
Morocco
Saudi Arabia
Palestinian Territories
Singapore
Turkmenistan
South Korea
Taiwan
Thailand
Turkey
UAE
33
Delivering the UK export ambition
Integrating trade and aid
George Freeman MP
Member of Parliament
for Mid Norfolk
34
The financial press are often fickle in their
enthusiasm, no more so than over the case
of emerging markets. Having heaped praise
on them for more than a decade, a slightly
chillier tone has crept in during the last year.
Whether it is proclaiming a great
deceleration (the title of a recent Economist
cover), or panicked articles about capital
outflows and currency depreciation as the
Fed considers tapering its asset-purchase
programme, the breathless enthusiasm for
the BRICs and N11 economies has been
overtaken by rekindled interest in the US
and Europe.
Establishing ties with these economies is
why our aid and trade missions need to be
strategically integrated. Trade is by far the
best form of aid. Kenya, for instance, has
transformed itself in recent years, building a
free market and the foundations of a liberal
democracy. By exporting our medical,
agricultural and energy knowledge to them
we can help accelerate this journey while
rebalancing our own economy away from
excess reliance on consumption and public
spending. Aid doesn’t have to be a fiscal
transfer from one state to another, but rather
a long-term investment in both.
It’s a useful reminder of the strengths of
developed economies. Western economies
boast many virtues – rule of law, world-class
university research, plural societies, open
markets for foreign investors, absence of
corruption – that many emerging markets
often lack. Yet this is precisely why these
emerging economies are such fertile territory
for our exports. In food, energy and
biomedicine, these economies and the wider
N11 are eager for the developed
technologies of the West. They are due to go
through in the next few decades the
agricultural and industrial revolution it took
us three hundred years to complete. In
agriculture, for example, the world population
is set to double by 2050, meaning we will
need to produce twice as much food with
significantly less land, water and energy. Far
from giving up on emerging markets, the
opportunity to use our science, technology
and innovation to help feed, fuel and heal the
emerging world in the three fastest growing
life science markets represents an enormous
revenue opportunity.
As recent events in India and Kenya have
shown, emerging markets can be a
challenging and risky places to do business.
But the death of emerging markets has been
greatly exaggerated. They remain our
greatest hope of achieving an export-led
recovery, and unlocking a new cycle of
growth to trade our way out of debt.
2
Appendix: Global export
benchmarking
35
Delivering the UK export ambition
This appendix sets out the methodology undertaken by Reform in compiling the export
benchmarking tool. It also includes the raw data and sources for the matrix.
Normalisation
The data from Table 7 has been normalised. For each item, after subtracting the mean from each
data point, each was divided by the standard deviation of this data set.
Labour
productivity
Innovation
Ease of doing
business; 2012
Total tax rate
Access to
finance
Openness to
trade
Cost to export
(in USD); 2012
Trade and
transport related
infrastructure;
2012
Table 7: Global export benchmarking matrix data set
Sources: The World Bank (2013) World Bank Database; United Nation Conference on Trade
and Development (2013) UNCTADStat; The Conference Board (2013) Total Economy Database;
Cornell University, INSEAD and WIPO (2013) The Global Innovation Index; World Economic
Forum (2013) The Global Competitiveness Report 2013-14. Accessed September 2013
na
44.7
91
63.7%
3.1
52.8
580
3.6
United States
63.3
60.3
4
46.7%
3.8
31.5
1,090
4.1
Germany
56.9
55.8
20
46.8%
3.2
98.6
872
4.3
Japan
44.5
52.2
24
50.0%
3.1
32.5
880
4.1
France
58.9
52.8
34
65.7%
3.0
61.2
1080
4.0
United Kingdom
Netherlands
50.9
60.7
61.3
61.1
7
31
35.3%
40.1%
3.1
3.7
65.0
164.0
950
895
4.0
4.2
Korea
29.9
53.3
8
29.8%
2.2
111.3
665
3.7
Italy
45.4
47.9
73
68.3%
2.0
59.2
1250
3.7
Russia
na
37.2
112
54.1%
2.6
52.7
2820
2.5
Hong Kong
41
59.4
2
23.0%
4.4
435.5
575
4.1
Singapore
44
59.4
1
27.6%
4.7
387.6
456
4.2
Canada
50
57.6
17
26.9%
3.8
62.6
1610
4.0
Spain
48
49.4
44
38.7%
2.1
63.2
1220
3.7
China
India
na
36.2
132
61.8%
3.3
53.7
1120
2.9
Belgium
61.9
52.5
33
57.7%
3.8
169.3
1230
4.1
Switzerland
49.5
66.6
28
30.2%
3.7
118.6
1435
4.0
Mexico
17.9
36.8
48
52.5%
2.6
67.2
1450
3.0
UAE
na
41.9
26
14.9%
4.5
184.4
630
3.8
Ireland
57.1
57.9
15
26.4%
1.8
192.4
1135
3.4
Sweden
54.5
61.4
13
53.0%
4.6
89.2
705
4.1
Luxembourg
75.0
56.6
56
21.0%
4.1
265.0
1420
3.8
Denmark
51.4
58.3
5
27.7%
3.1
104.6
744
4.1
na
41.2
22
14.5%
4.1
94.8
935
3.2
39.8
na
na
na
3.9
138.7
na
na
Saudi Arabia
Taiwan
36
Figure 11: UK market share in largest goods markets compared to Germany and USA (2012)
Source: International Trade Centre website (2013), “Trade Map”, http://www.trademap.org. Accessed November 2013
Percentage
market share
20
UK
USA
Germany
15
10
5
0
USA
China
Germany
Japan
France
Netherlands
Hong Kong
South Korea
India
Italy
Figure 12: UK market share in largest service markets compared to Germany and USA (2011)
Source: International Trade Centre website (2013), “Trade Map”, http://www.trademap.org. Accessed November 2013
Percentage
market share
UK
Germany
USA
30
25
20
15
10
5
0
USA
Germany
China
Japan
France
India
Netherlands
Singapore
Ireland
South Korea
Reform
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