With the UK officially leaving the European Union on March 29, 2019 the countdown to Brexit is starting to feel very real. The next 12 months will be of vital importance for UK businesses to take the right actions to ensure they are as prepared as possible.
The last few years have been among some of the toughest in the energy industry and, even with improving oil prices, the uncertainty around Brexit means it may get even harder in the short term. So, what can companies do to grow during these challenging times?
Well, during my time as EIC chief executive, I’ve had the opportunity to speak to and learn from hundreds of UK suppliers of all sizes, and covering all energy sectors, from tier-1 EPC (engineering, procurement and construction) oil and gas contractors through to small family-run technology firms in renewables.
Many have put incredible strategies in place which have enabled them to flourish even during the downturn. However, one strategy is notable by its relative lack of uptake, of particular significance given the new horizons we’ll be facing post-Brexit, that of export.
According to government statistics, only 11 per cent of companies across all sectors export and the energy industry appears to be no different. Indeed, EIC Survive & Thrive 2017 analysis found that only 8 per cent of companies surveyed focused on new export markets as their primary growth strategy. Given the phenomenal results that exporting can achieve, and with Brexit looming, this is surprising and worrying.
There are brilliant exceptions of course. One example of a company choosing export as its growth strategy in the downturn is the winner of the 2017 EIC Export Award, PJ Valves.
Headquartered in Hertford, PJ Valves manufactures valves primarily for the oil and gas sector. In 2011 it took the decision to expand into new markets, setting up offices in Houston, Texas and then Singapore. Today export sales account for more than 70 per cent of its revenues, compared to 20 per cent in 2011. To put a figure on it, that’s about $30 million over three years.
It’s clear that finding new markets for your products can pay off. So the obvious question is why aren’t more businesses doing it?
A key reason is that developing new energy sector export markets takes, on average, three years to yield profits; too long for many companies to wait when cash strapped. Companies have typically chosen faster routes to cash generation, focusing on core customer retention through product and service innovation; a good strategy, but often providing lower growth rates than exports.
Frustratingly, there are many government agencies that are available to help companies to accelerate their export campaigns and build trading links around the world, but our studies show that only about 20 per cent of businesses are aware of, or utilise, this support.
We work closely with the Department for International Trade (DIT), UK Export Finance (UKEF) and Scottish Development International (SDI) to support their export strategies, products and services, including organising round tables with ministers.
UKEF has the potential to create step-change export growth. We support UKEF export showcases, procurement portals for energy projects being financed by UKEF. In return for funding, these projects must include a minimum of 20 per cent UK content; it’s a fantastic initiative, shortcutting international growth for experienced and first-time exporters in some of the biggest energy projects around the world.
DIT and SDI have trading experts located around the world who are specifically there to help UK companies make connections, establish local partnerships and grow business globally. Business owners and sales leaders normally are not afraid to take free help, so why not here as well? Funding is also often available to subsidise attendance at overseas exhibitions and delegations.
There’s a whole world of opportunities out there. Make sure your company is first in line come March 2019.s