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Exports begin at home

19 June 2018 | By Pip Brooking

As the UK prepares to leave the EU, we speak with business leaders to discover how UK firms can take advantage of more opportunities overseas

As the Brexit debate continues, there has been more talk of trade than there has been in decades.

There needs to be. The EU is overwhelmingly the UK’s most important trading partner, accounting for 48 per cent of total exports and 55 per cent of imports. 78 per cent of UK exporting companies do business there.

But whether it’s trading relationships with Europe or with countries further afield, it’s something the UK clearly has got to get better at. Our trade deficit is second in the world only to the US and no more than 15 per cent of firms in the UK sell anything overseas. 

“Exporting might not be the answer to every challenge facing the UK, but it is a good answer to many,” said CBI Director-General Carolyn Fairbairn to an audience at the International Business Festival in June. She cited the need for more, better paid jobs; for improving productivity; and for advancing prosperity in all parts of the UK.

So speaking in Liverpool – which once carried 10 per cent of the world’s trade through its docks – she asked the question: how can we become a great export nation once again?

A focus on competitiveness

The answer provided by thousands of CBI members, Fairbairn said, was that exports begin at home.

“The world will not shop at our shores unless we have products and services it wants to buy at a price it wants to pay. And for that the home conditions must first be right,” she explained.  

The world will not shop at our shores unless we have products and services it wants to buy at a price it wants to pay

So she emphasised the basics that are crucial for success in a global economy. She focused on the need for skilled people and an immigration system that places a premium on people’s contribution, not numbers. And to prove the importance of effective infrastructure, she highlighted the impact just one new route from Manchester to China has had on the local economy over the last two years.

She also spoke of businesses thriving in an environment that supports innovation, and where tax and regulation incentivises investment. Importantly, she added that the government’s industrial and trade strategies “must be two sides of the same coin”.

How innovation drives exports

These points were echoed by CBI members interviewed by Business Voice about what they feel lies behind their exporting achievements – and where more support could be offered.

Amino Technologies, spun out of Acorn Computers, that 80s stalwart, has flourished as part of the tech cluster that Cambridge is known for. The company delivers software and hardware solutions to pay TV companies. With limited opportunities in the UK (thanks to the dominance of Sky and historically slower broadband), two thirds of its business is in the US. Success there has given it the confidence to follow the opportunities in Asia Pacific and Latin America, as those markets develop in a similar fashion.

Mash Direct produces ready-made mash and vegetable dishes – and has found success in surprising places, such as Dubai, because “there had been nothing like us in the market,” says Director Jack Hamilton.   

“We’ve started trying to pick the markets where we felt we were way ahead of the game,” he adds. And after a few years of trying to break into the US, the hard work has paid off as it launched in New York earlier this year.  

Changing relationships

For Jarl Severn, Managing Director at medical device manufacturer Owen Mumford, innovation and exports work hand in hand to fuel the company’s growth. 90 per cent of its sales are overseas and if it didn’t export, it wouldn’t have developed the products it has, he explains.

“The domestic market isn’t big enough to support us,” he says.

But he also emphasises the importance of clarity in trading relationships. As the US makes 50 per cent of the world’s purchases of medical devices, it’s Owen Mumford’s biggest market by far. And although Severn remains convinced that “any good player will be able to do well in America”, he recognises the market is “getting a little bit more closed”. He adds that customers there also want to understand how robust their supply chains will be after Brexit.

And when there are currently no guarantees British suppliers will have the same eligibility to supply into Europe after Brexit, Severn is already seeing customers there making preparations “just in case”. “It is beginning to affect some of our business,” he says.

Match fit for Brexit

But Ben Towe, Group Deputy Managing Director at cold-rolled steel manufacturer Hadley Group, believes it’s the UK’s strength in innovation that will save it from the worst affects of Brexit.

“The threat [to our business] is there. We are concerned about the duties. We are concerned about border controls,” he explains. “Our international clients have said they’re not happy about it either, so they’ve gone out and they’ve tried to seek alternatives. They are available, of course. But they have to be alternatives at the right price.”

And by price, he’s not just referring to the cost, but also the relationships that can be traded upon.

We should be more positive and just go out and grab the opportunities

40 per cent of the company’s turnover is generated overseas – and despite losing contracts from some European quarters, it has more than offset them by moving swiftly to take advantage of the current favourable exchange rate to win new business.  

“Ultimately, the level of innovation in the UK economy is enormous and we produce some of the best products, and we have some of the best people. We should make more of that, be more positive, and just go out and grab the opportunities.”

Despite Brexit uncertainty, many growing businesses can – and are – doing just that, says Chris Manson, Chief Executive of consultancy Newable (formerly Greater London Enterprise and now a national delivery partner to Department of International Trade).

Although many larger firms are looking at the long term and may be worried about where to locate their factories, he says that small and medium-sized businesses are particularly well suited to seizing short-term opportunities over the next 3- to 12 months.

“The advice we are giving – and what our companies are seeing – is the opportunities will increase over the next couple of years, provided the UK economy remains flexible, adaptable and nimble.”

Reputation leads the way

And whether its goods or services, the UK has a positive reputation to build on.

In her speech, Carolyn Fairbairn gave Plymouth’s Princess Yachts as an example of a company that improved its fortunes by making more if its “Built in Britain” status to aspirational consumers overseas.

And Darren Baxter, Group CEO of warehouse management software firm Indigo, credits a similar appetite among foreign businesses for spurring his company’s success in Asia.

“There’s an insatiable appetite for importing cheap consumer goods produced by South East Asian companies, but when it comes to ASEAN firms buying B2B products and services, the reverse is true and ‘Brand GB’ is held in high regard,” he explains, pointing to fast-growing businesses “keen to adopt best practice”.

Indigo spotted the opportunity two years ago and started to establish operations there, initially setting up in the Philippines before expanding to Hong Kong and Singapore with dedicated subsidiary companies.

Boldly go

To expand in Asia, Indigo tapped into support from a range of places, including Invest HK, the British Chamber of Commerce and the CBI. Trade shows also formed a major part of the company’s research.

“Attending CILF (China International Logistics and Transportation Fair), one of the region’s largest trade events for the sector highlighted the fact that that few UK logistics software companies were actively targeting mid-range businesses in Asia and yet demand for our products and services would be likely to grow as the local economies grew,” he explains.

Taking part in trade missions to Turkey, Brazil, Colombia and Mexico has been important to Amino Technologies, says its Group CEO Donald McGarva. Dinners hosted by the embassies were a “great opportunity” for inviting and talking to potential customers. But this only works, he adds, if your senior people make the time to go themselves.

“Because you’re travelling with other people – and not necessarily competitors – on these trade missions, there is quite a sense of shared learning,” adds Newable’s Manson. “It’s very powerful in giving people the confidence to take the next step.”

Indeed Mash Direct’s Hamilton believes that peer support and sharing experiences has been key in helping the company expand – even if it’s just a matter of picking up the phone to other businesses from your office. “We’re all in the same boat – sometime literally, in that we’re shipping our goods together and hoping to consolidate to reduce costs.”

A helping hand?

But all of them believe the government could do more to help.

“If it’s the cornerstone of our Industrial Strategy to be strong through innovation and export, I think we’re hitting the right note on innovation but I think we’re far from getting it right on exports, especially for SMEs,” says Owen Mumford’s Severn. He points to the success of R&D tax credits for encouraging innovation, but wonders why there is no equivalent for exporting, which can be just as high-risk.  

As Brexit looms , we need strategic direction, consistency, a common framework

And for Hadley Group’s Ben Towe, there’s a reason why SMEs don’t all export: they need help to scale first. Yet he believes there is less support for medium-sized and large companies who could benefit from it more.

“Successive governments have announced countless small-scale export policies, leaving a plethora of support schemes and a patchwork of good intentions,” said the CBI’s Fairbairn. “Yet as Brexit looms, we need strategic direction, consistency, a common framework, in which firms know whom to approach, and what help they can expect.”

Government ramps it up

And the Department for International Trade (DIT) is listening.

On the 18 June, Secretary of State Dr Liam Fox joined the CBI’s inaugural International Trade & Investment Council, bringing together CEOs from some of Britain’s most successful international businesses to work with government to “get this right”.

And commenting to Business Voice, Baroness Fairhead, the Minister for Trade and Export Promotion, says the government is intent on ensuring British businesses are well placed to rise to the challenge of exporting – both with the EU and markets further afield. 

She points to the UK firms that have used and valued existing tools, such as DIT’s International Trade Advisers, the GREAT campaign and GREAT.gov.uk.

UK Export Finance has also proved to be a game-changer in supporting British companies to agree billions of pounds worth of overseas deals,” she says. “However, it is evident that we need to make this offer sharper, targeting high potential businesses and specific market opportunities in line with UK appetite and expertise.”

The government’s Export Strategy – due to be published shortly – will help, she continues.

“It will lay down the framework for supporting businesses to find and win contracts overseas using enhanced digital services, tailored advice, and in-market support. It will also set out how we’re going to make our offer work for businesses of all sizes – ensuring that UK companies from throughout the supply chain are given appropriate and valuable assistance.”

She adds that it’s “critical” that the government’s Export Strategy should tie in closely to its Industrial Strategy. “The Industrial Strategy has already outlined the government’s long-term plan to increase the productivity and earning power of people throughout the UK, and the Export Strategy will aim to create the framework to support UK exporters to expand internationally on the back of this.”  

Transcending borders

And highlighting the link between policy at home and success abroad, Manson looks to space.

Newable is also a founding investor in the Seraphim Space Fund, which launched 18 months ago to support growing SMEs that are using satellite data to deliver new products and services – from tracking shipping to making predictions for the insurance industry. It is backed by the government, through the British Business Bank. “It’s an interesting example of something that requires government support, which then creates an ecosystem that attracts the best companies here,” Manson explains.

Thousands of companies are applying for funding, developing “a pocket of excellence” for European space technology in the UK, which he believes could be replicated for other new areas, such as artificial intelligence.

“These companies are born global – so a government policy that is designed to encourage investment also helps to improve exports,” he adds.

This example also demonstrates that the UK exists as part of a global economy, where appetite for innovation and excellence isn’t confined by borders. The importance of remaining part of EU space and science programmes is a topic worthy of a piece in its own right.

But when it comes to improving our standing as a trading nation, it’s further evidence that the UK needs to act now to stay competitive – and give firms the support they need.

As Fairbairn said in her speech, “Brexit and global uncertainty will be with us for a while yet. In the meantime, we can make a difference to what we can control.”

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