Finding the will and the way to export

Government export targets may be difficult to hit, but there are optimistic signs of emerging businesses boosting UK trade abroad

When George Osborne set his target to double the value of UK exports to £1 trillion by 2020, a glance at Britain’s historic trade performance might have told him it was a plan that could prove tricky to deliver.

Since 1970, the UK has delivered a trade surplus only four times, in 1971, 1980, 1981 and 1982. If the nation’s appetite to export since the Chancellor set that ambitious goal is anything to go by, we might be in for a rather long wait for the next one.

Indeed, the latest estimates from the British Chambers of Commerce predict that the £1-trillion benchmark, never mind achieving a trade surplus, will be missed by 14 years at current rates of progress. As margins of error go, it’s embarrassing for the government, but also points to what a huge challenge it is to turn around the UK’s anaemic showing in international trade.

Foreign and domestic risks

With the current strength of the pound beginning to act as an additional headwind for UK exporters and continued weakness in European Union economies, which taken together are by far our largest market, encouraging British companies to do more business overseas is not about to get any easier.

Uncertainty caused by the debate over Britain’s membership of the EU, as well as related issues concerning stronger immigration controls, give further cause for concern to those eager to boost trade. According to research from Zurich Insurance, a fifth of small and medium-sized businesses are worried about the impact on exports should Britain sever its ties with the EU.

China’s slowdown and recent currency devaluation, means doing business with the world’s second-largest economy could also be about to get harder. The Netherlands Bureau for Economic Policy Analysis, keepers of the World Trade Monitor, has already warned that the volume of global trade fell 0.5 per cent in the three months to June compared with the first quarter – its biggest contraction since the 2008 financial crisis.

So what can be done to whet companies’ international appetites? Reforming the government’s export support agencies, UK Trade & Investment (UKTI) and UK Export Finance (UKEF), makes for an obvious starting point.

Critics say the services have had too little financial support from the Treasury given the implications their work could have on the wider economy. Users of UKTI have reported that the quality of its services and advice has improved significantly in recent years, but still far too few businesses are aware of its existence or that of UKEF, which provides financial assistance to exporters.

And companies that are aware of the agencies’ existence don’t always get the right support. According to a recent Labour-commissioned report into British exports led by Graham Cole, the chairman of AgustaWestland, UKTI is too focused on “selling its products and services as a box-ticking exercise” instead of helping companies to forge relationships with overseas partners. UKEF was also criticised, with Mr Cole’s report claiming it “lacked the appetite” to back smaller businesses, while those that did apply for its services were allegedly tied up in red tape.

The process of finding a market and selling overseas for the first time has never been easier for fledgling companies

The government seems to have got the message; it says it is remodelling its delivery on exports with a “cross-Whitehall implementation taskforce” being led by Business Secretary Sajid Javid to improve public support for traders. What of the £1-trillion target? Policymakers are calling that an “aspiration” now. The new target is to “get 100,000 more companies exporting by 2020”.

Home or away

Improving the quality and availability of government support is only one piece of the puzzle, however. There appears to be a wider cultural issue of a lack of international ambition among many UK businesses, which is probably partly down to the fact that their domestic market is often large enough to provide a comfortable level of demand.

Many seem content to stick to their knitting, preferring self-sufficiency and domestic customers to the cut and thrust, and considerable risks, of international trade. From currency worries, getting to grips with new languages and cultures, and the age-old fear of getting paid on time, the fear of the unknown is understandable.

Yet there may be cause for cautious optimism in anecdotal evidence that suggests a new generation of businesses appear to be looking abroad much earlier in their lifespans than their older counterparts did. The process of finding a market and selling overseas for the first time has never been easier for fledgling companies, thanks to the rise of online marketplaces such as Amazon.

Encouraging an area of the economy that’s often overlooked when it comes to international trade might also prove fruitful. Portrayals of successful British exporters from the media and politicians tend to focus on companies that manufacture or deal in a physical product. Yet the UK ranks as the second-largest exporter of services in the world behind the United States.

But there is the potential for far more; less than a quarter of services-based companies trade abroad, compared with more than half of manufacturers.

Learning the lessons from exporting powerhouses will also be crucial. For example, copying the German model of establishing chambers of commerce in more key overseas territories might help those willing to give exporting a go grow their sales more quickly, and help existing exporters push into new markets. Businesses would be able to access somewhere that provides expert local commercial advice, introductions to distributors, potential customers and supply chain experts, as well as a physical base from which to work while exploring opportunities.