• 25 per cent of exporters haven’t reviewed their trading strategy following Britain’s decision to leave the EU
• Of exporters who have reviewed their strategy, 53 per cent are prioritising domestic over international trade
• A net balance of 25 per cent of exporters now expect their total overseas sales to increase in the next six months
• A net balance of 30 per cent of exporters expect trading with the United States of America to bring the biggest opportunities for their businesses in the next six months
• But, challenges still remain with 42 per cent of businesses citing exchange rate uncertainty as their biggest barrier to exporting
One in four British exporters still haven’t reviewed their trading strategy following the UK’s decision to leave the EU, according to the latest Business in Britain report from Lloyds Bank.
This is an improvement of 23 percentage points on six months ago when compared to a similar survey carried out by Lloyds and YouGov of over 1,000 British exporters.
Of those exporters that have reviewed their trading strategy, more than half (53 per cent) have decided to focus more on UK opportunities, which is an increase of 23 percentage points when compared to the same YouGov survey, showing that an increasing number of UK firms are shunning international markets to focus on domestic opportunities.
Despite this, Britain’s exporters remain largely buoyant about their 2018 trade prospects following a positive 2017 exporting performance.
A net balance of 25 per cent said total exports have gone up over the previous six months with a similar number expecting total exports to increase over the coming six months.
Clive Higglesden, head of trade and supply chain product, Global Transaction Banking at Lloyds Bank, said: “The decision of a quarter of UK exporters still not to review their international trading strategy following the EU referendum is concerning. It is comforting to see this number decrease from what it was a year ago, but 25 per cent is still disconcertingly high.
“It is perhaps understandable that British firms are looking to limit their exposure to foreign markets and focus on what they know, as they believe this to be the less risky strategy. However, they need to be conscious that they will be more heavily impacted by UK business cycles and could be left heavily exposed to a downturn in the UK economy. Diversification into overseas markets can reduce exposure to these cycles and can in fact reduce a company’s overall risk.
“The survey does show that exporting will still play an important role in British firms’ plans and it’s encouraging to see exporters display such confidence towards their trade prospects.
“Judging from British firms’ export performances over the previous six months, this confidence is not misplaced and by using internal trade as a growth strategy for their business British firms can manage risk and look to grow in 2018.”
The Business in Britain report, now in its 26th year, gathers the views of over 1,500 UK companies, predominantly small to medium-sized businesses, and tracks a range of performance and confidence measures, weighing up the percentage of firms that are positive in outlook against those that are negative.
British exporters expect the biggest opportunities for international trade to be with the USA (30 per cent - up from 22 per cent in the first six months of 2017), followed by China (15 per cent - up from 11 per cent in half one 2017) and Germany (nine per cent - up from seven per cent in the first six months of 2017).
The current top three most popular trading partners for British firms are the USA, France and Germany, with 45, 36 and 36 per cent of companies respectively exporting to these countries.
Clive added: “British exporters continue to see the US trade market as the promised land as they look to pre-emptively tackle the impact of a potential loss of access to the EU single market.
“Given the familiarity of UK businesses with the products and culture of the USA, and the fact they are primarily English-speaking, it is understandable that this is a key target for British exporters. However, I would encourage exporters not to neglect other countries, as they may be more accessible than they might think and there are numerous sources of help available to manage this process.”
Despite the general positivity around trading overseas, businesses accept that challenges still remain. Firms state the biggest barriers to exporting as exchange rate uncertainty (42 per cent of exporters stated this as the single biggest challenge), tariffs and quotas (cited by 29 per cent) and difficulty finding potential customers (cited by 26 per cent).
With negotiations ongoing between UK and EU diplomats over the future relationship between Britain and Europe, exporters most want to see the UK prioritise free trade agreements with USA (28 per cent - up from 24 per cent in the first six months of 2017), EU (12 per cent - from 11 per cent in the first six months of 2017) and China (12 per cent - from 10 per cent in the first six months of 2017), followed by Germany (eight per cent – same as the first six months of 2017) during discussions.
A net balance of 16 per cent of all firms questioned say the fall of the pound is bad for the economy, with the same number saying it’s bad for their business.
Clive added: “Trading overseas can feel intimidating, but with the fall in the value of the pound making a lot of British exports more attractive overseas I’m certain that there are many opportunities for British exporters to prosper globally with the right support.
“Lloyds Bank is here to help, and our strategic partnership with the Department for International Trade as well as our teams of locally-based relationship managers can provide the kind of insight, support and introductions that can be invaluable to firms setting out on, or expanding, their export journey.
“To support customers further we also provide access to our International Trade Portal which helps both current and prospective exporters understand the best market for their product or service, the trading requirements and conditions for that market, as well as buyers or suppliers they may wish to work with. Lloyds Bank can also help customers manage other risks associated with international trade, for example foreign exchange risk. It’s a big step in the right direction to help new or experienced exporters navigate the sometimes tricky international trading waters.”
Baroness Fairhead, minister of state for trade for trade and export promotion said: “There are strong reasons for the UK to be optimistic about exporting as the number of British goods and services sold around the world rose by 11.3 per cent last year. But there is still more to go for – which is why the Department for International Trade is about to launch a new and ambitious Export Strategy to help British businesses unlock opportunities overseas.
“With 90 per cent of global growth expected to come from outside Europe, we will ensure that – with the right strategy and backing from government – more businesses of all sizes will look to markets around the world to grow their sales.
“Our flagship great.gov.uk export platform already provides firms with access to millions of pounds’ worth of potential overseas business, helping them start or increase exporting. Since its launch, great.gov.uk has promoted 11,400 export opportunities and helped around 2.7 million businesses on their export journeys.”
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