Exporting Overseas Key for SME Growth

Small Business News

16^th February 2011

Small and Medium businesses (SMEs) should consider expanding overseas to bolster growth. Recent research by ICAEW (Institute of Chartered Accountants in England and Wales) concludes that 70% of UK businesses are looking overseas to further their recovery and that the downturn has increased the pace of globalisation in advanced and emerging economies.

With spending cuts and slow growth in the UK have cutting domestic demand, access to new markets is cited as the primary benefit to expanding abroad. Small businesses however need to consider a number of factors before they start the globalisation process.

Clive Lewis, ICAEW’s Head of Enterprise, Clive Lewis, said:

“The UK is an almost saturated marketplace. Economic growth will be delivered by SMEs and those that look beyond these shores to market their products and services. There are three key things to get right before exporting business though; the Plan, the Place and the Process.”

The Plan

• Research is critical. This may be difficult but it should not be neglected especially as many decisions to export are opportunistic. Investigate on a social, economic and political level.  
• Assess the product range and identify which products to export and the modifications that will be needed to enter different markets eg images and language on packaging etc.
• Get the finances in order. Entering new markets differs from increasing a share in the UK. Start-up costs, contingency funds and currency fluctuations should all be budgeted for.
• SMEs should be clear about their strategic objectives, have a clear strategy to achieve them and ensure it is stress tested.

The Place

• Consider all options as any number of things can affect the success of a move like this. If you’re thinking globally, you have to look at the bigger picture.
• Know your legal position in relation to UK Tax; export and import controls; and what documentation is required such as Movement Certificates or Carnets.
• Find out about the laws in the potential marketplace too. What is the tax system like (including taxes on sales)? When exporting to the Gulf, for example, what impact will Islamic banking practices have on your business?  
• Talk to freight/transport agencies to decide on the logistics of moving goods.

The Process

• How will you physically manage the operation? Will you recruit a team on the ground or have UK staff travel abroad? In some countries companies are required to have a minimum of local directors in the board.
• Will you operate through an incorporated body or set up a joint venture with a local partner? This choice can have huge implications on the laws which govern the venture and the taxes that apply.
• What impact will all this this have on your UK operation? Consideration should also be given to the transfer of funds from and/or to the UK.”   

In present day Austerity Britain, with its slow and fragile recovery, international expansion has many benefits. The Prime Minister, David Cameron, speaking at the World Economic Forum in Davos, made it clear that growth will come from international trade. He said:

“We need to rebalance our economy with greater emphasis on exports, manufacturing, high tech and new green industries.”

Clive adds:

“There’s good news to support the prospect of growth from exports in the current exchange rates. UK exporters are enjoying an increasingly competitive position and more UK businesses are already choosing to exploit international markets to take advantage of the situation.”