Mid-size firms being too conservative in their export plans – Lloyds

UK mid-sized businesses are being too 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.
 
Three out of five firms (58%), with an annual turnover between £25m and £750m, have said they do not currently export and less than one in 10 (7%) are looking to do so within the next five years, indicating that over half of mid-sized businesses are still cautious in considering their long-term export strategy.
 
The research comes as recent indicators have shown that firms are more bullish about the UK economy with business confidence reaching a 22-year high according to the bank’s Business in Britain report, published in July.
 
According to the findings, just under a fifth (17%) of firms stated that selling overseas is one of their top three business objectives for the next 12 months.
Mid-sized firms are more focused on increasing turnover, with 60% of firms making this their top priority. This is followed by 43% of mid-sizers, which are concentrating on growing their UK market share.
 
Similarly a third of mid-sized businesses are focusing on reducing their costs (38%) and a similar number increasing their productivity (34%). The figures were similar when respondents were asked for their objectives for the next 10 years or the next 12 months.

The bank said this lack of focus on exports was despite businesses being aware of the benefits. Of those mid-sized businesses that export around three-quarters said that the main advantages of overseas trade were expanding their customer base (73%) and increasing sales and profit (77%).
 
Steve Clarke, Area Director for Lloyds Bank Commercial Banking, in the West Midlands, said: “Although business confidence has reached a record high, mid-sized firms often appear to be overlook the benefits of exporting.
 
“The size of the international opportunity clearly depends on the nature of the sector. However it also reflects the fact that 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 in 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 those mid-market businesses that do export, Europe is the top destination, with three quarters of firms (74%) citing the region as their primary export market, followed by North America (13%) and Asia (5%).
 
When asked which countries they expect to sell to over the next 10 years, 14% said China, 6% Germany and France.

Only a proportion of UK exporters have taken logical steps to export with half of firms (50%) visiting potential clients to research their market, under a third (31%) undertaking market research and under a quarter (23%) building an export plan with their banks.
 
Just under half of UK exporters (46%) said that they found the Government’s UK Trade and Investment department (UKTI) very useful or helpful in reaching their aims while a similar number (43%) were not aware of the organisation, showing an opportunity for more awareness and education about the services on offer.

“Although there is a great deal of interest in emerging economies, there is still a relatively low level of export activity to these regions. The picture is slowly changing, but too many UK firms appear to be prioritising markets closer to home over the long term,” added Clarke.
 
“This makes sense given the proximity and the single market, but businesses will find opportunity in exploring the benefits of exporting to emerging economies further afield.
 
“Exporting is an important investment decision and we want to give businesses the confidence and support to develop and grow into new overseas markets.”