The SME perspective: international trade

As part of our ongoing work with SMEs across the country, the CBI recently held a member discussion considering what options and support were available for SMEs looking to expand internationally, by exporting their good and services to new markets.

As the UK embarks on a new trading regimen, the ability for firms of all sizes and sectors to branch into exports is an issue of critical concern. To that end, the Department for Trade and UK Export Finance worked with the CBI to convene the discussion. The focus was on introducing the services and support available from the Department for Trade and UK Export Finance, and to allow members to feed back their experience.

Key feedback from members included:

• One challenge to expanding their business internationally comes from the growing trend of export credit insurance becoming much more expensive
• The government needs to create interventions to fill the gaps left by private sector coverage during the economic downturn caused by the lockdown. Whilst bodies such as UKEF are designed to correct any market failure, they still need to do due diligence so they avoid investing public money into bad risks.

The exporting challenges for SMEs

The CBI recognises that the limited availability of products like Trade Credit Insurance represents a challenge for modern economies in Europe and beyond. We therefore took part in the discussions with both the Department of Business Energy and Industrial Strategy and The Association of British Insurers, for the rollout of the government’s £10bn Trade Credit Insurance guarantee.

The CBI will be calling for the Trade Credit Insurance guarantee to be extended until June 2021 to support domestic businesses and exporters, providing additional support following any fallout from Brexit.

Feedback from members on this issue included:

• Brexit continues to present a concern to both CBI members, and international investors. The dual impact being that it adds a further layer of uncertainty for firms both within and beyond the UK when making investment decisions
• For start-up firms, problems begin to present themselves when looking to attract investment in the early stages when they present less of a known quantity. Furthermore, they sometimes suffer from an array of support and can find it an overwhelming and complicated process, which too often leads to them pursuing the path of least resistance and opting for high street or traditional lenders.
• A concern was expressed in relation to the purchasing of an overseas business. In experiencing slow payments, they had been forced to using bonds to protect their cashflow. Other members agreed with the importance of bonds and had only been able to protect an investment of £70,000 thus far
• The question of whether UKEF funding could be applied for training was raised. The need for new skillsets could be met by the provision of funding for training. UKEF believes this should be possible (as manufacturers do to invest in new machinery or tech), but recommended direct discussions with UKEF and the Department for Trade.

In conclusion

There is a distinct lack of awareness of the support and guidance available to businesses. The UK provides much needed support for firms of all sizes and sectors, but businesses need a clear signpost on what schemes they are able to access, and support in how to access them.

There are clear and unparalleled opportunities available to firms in expanding internationally, but for SMEs to do so successfully, the right framework of funding, guidance and ongoing support are essential.