SMEs ‘missing a trick’ in export markets, report suggests

ONLY one third of the region’s SMEs have caught on to the potential benefits of global export markets despite evidence that overseas demand is helping to fuel growth amongst many Yorkshire firms, according to a study released today by Lloyds TSB Commercial.

Amongst the 67% of businesses that are not currently exporting, only 9% have plans to do so – and it is feared that the disruptions caused by the volcanic ash cloud could reduce this further.

Many Yorkshire firms are put off by worries that an export strategy would not succeed, the report reveals.

The biggest concern amongst all SMEs questioned is that there would not be demand for their product or service overseas.

Other concerns include fears about possible late payments, foreign currency fluctuations, worries about potential bed debts and language barriers.

Companies also cited a lack of resources to explore new markets and a perceived lack of expertise as reasons why they are not exporting.

Nationally, the recent volcanic ash cloud has also impacted SMEs’ views on exporting – 16% say they have been put off overseas trading by the recent disruption, and 71%  believe there should be more contingency arrangements in place to avoid similar disruption in the future.

While many firms in the region appear to have been deterred by fears about overseas demand, half of those businesses that are actively exporting 69% now say foreign trade is central to their growth strategies.

The same proportion – 69% – reported that they had have been spurred on by strong overseas demand, and 6% said that foreign trade has become more important given weak domestic demand.

More than four-fifths of Yorkshire SMEs that export recorded growth in these markets in the last 12 months.

In spite of the fears many firms have about currency fluctuations, 13% of exporting businesses say the current relative weakness of sterling has encouraged them to trade overseas.

Amongst those Yorkshire firms that are exporting, overseas trade is contributing to a growing proportion of company turnover.

Almost two thirds of businesses now say that exports account for more than 20% of their current turnover and 88% say this proportion has increased during the past year.

Almost all believe that exports as a percentage of turnover will increase this year, or at least stay at current levels.

Businesses in Yorkshire are also looking to tap into export markets further afield. Although the vast majority of firms say North America and the EU are their main markets, many see potential elsewhere in the world.

Six per cent have their eye on China and the Far East, and 13% see major opportunities across Africa and the Middle East.

John Robson, regional director for Lloyds TSB Commercial in the North, said: “There really is a world of opportunity out there for Yorkshire small businesses. Many firms are turning overseas demand and a weaker sterling to their advantage as they seek to grow. Others are clearly missing a trick.

“While exporting may have traditionally been seen as only suitable to companies in industries such as manufacturing, firms operating in other sectors have the opportunity to explore new markets and assess international demand for their products.”

He added: “Despite the recent disruptions and associated drop in confidence caused by the volcanic ash cloud, at a time when domestic demand is subdued, thousands of small firms could still benefit from markets overseas.

“Although traditional markets in Europe and the US will remain the main targets for most firms, there is real potential across the Middle East and Asia which is as yet untapped.”