Focus on international growth would bring jobs and revenues surge for SMEs

Up to 45,000 jobs could be created in the Manchester region if SMEs were able to access more markets beyond the UK.

But Manchester companies say there are many barriers to a successful switch to overseas trading, such as different laws and regulations and challenging trade logistics.

Research carried out by banking group Santander UK has looked at the benefits of expansion to international markets. Overall, it says the UK could generate an extra 1.9 million jobs and businesses could add a third to their revenues if they were able to boost their international trade.

In Manchester alone, this could see a potential £1.6bn revenue benefit with 45,000 jobs being created, according to Santander’s ‘Unleashing UK businesses’ international growth potential’ report.

UK companies say the main benefits to international trade are an increase in profits followed by a diversified client base, improved business resilience and an enhanced brand.

In separate research, Santander’s Spring Trade Barometer, 59% of companies that trade internationally report an improved performance over the past year compared with just 46% of those which do business solely in the UK. They are also more confident about increased growth, with 78% of these companies optimistic about growth over the next three years versus 69% of domestic only businesses.

However, it is clear from research that businesses can be put off expanding internationally by the perceived barriers to doing so. The key areas highlighted by businesses in Manchester include:

• A lack of knowledge about local laws and regulations (42%);
• 28% lack an understanding of the best financial solution available to facilitate expansion, eg, the most appropriate available form of credit); and
• Challenging trade logistics (40%).

John Carroll, head of international and transactional banking, Santander, said: “The UK is a strong incubator for SMEs, but as our data shows, international expansion is key to unlocking future growth potential for the UK economy.

“We must help to remove the barriers to expansion and support UK companies to take advantage of the benefits of reaching markets outside of the UK.

“The opportunity is there but if we are to maintain our status as a leading global economy, there is more to be done to foster international growth.”

Many UK businesses are looking to international trade as a means of economic recovery. Santander’s recent Trade Barometer showed that more than a third (38%) perceive international growth as the way out of current UK economic challenges, and 65% believe international markets have greater growth potential than that of the UK.

Additionally, 36% say the current economic conditions have made overseas markets more important to their business. Over the past few years, the economic environment in the UK has been difficult to navigate for many businesses with the political uncertainty of Brexit, the impact of COVID-19 and the escalation of the war in Ukraine. As they look ahead and strive for future growth, the main difficulties businesses in Manchester highlighted in the research include:

• Impact of customers spending less (32%);
• Increasing cost of doing business, such as increased energy bills, increased raw materials costs and increased staff wages (30%);
• Increased competition is making future growth prospects more challenging (21%); and
• Difficulty in finding adequately skilled staff (15%).

Providing support and guidance to SMEs that are looking to navigate these challenges is key to unlocking the potential for the UK and beyond. When asked what kind of support aspiring businesses in Manchester would find useful:

• 40% said they would benefit from support with logistics, such as an established choice of providers;
• 23% stated they would benefit from a forum where they can discuss mutual challenges and opportunities;
• Almost a third (30%) of companies stated that assistance with navigating customs processes is key.

The research also identifies two key areas that government can support with, first, a reduction in bureaucracy, especially around barriers to trading. Secondly, support with skills and the labour market to ensure companies can take advantage of the potential for growth with people who have the right skills and knowledge to help their businesses.