David Atkinson, UK Head of Manufacturing SME & Mid Corporates, Lloyds Bank asks colleague Ralph Edwards, Head of Trade Sales, why the time is right for UK manufacturers to explore their export ambition.
It’s been said that the glory days of British manufacturing are now behind us. However, as David explained, that’s just not reflected in the facts, especially when you zoom out and take a global view. “We’re the world’s fourth largest exporter, behind only China, the US and Germany,” he said. “And, while manufacturers may only make up around five per cent of UK businesses, they account for almost half of the nation’s exports.
“It speaks volumes that, while fewer than one in ten UK businesses currently export, more than nine in ten UK manufacturers sell overseas. Yes, there are challenges, but manufacturers are adept in navigating them, and they have a vibrant support ecosystem to lean on.”
What does the current export environment look like?
“Looking at our latest research, there are currently some really encouraging indicators. Our May Business Barometer survey of more than 1,000 firms across the country shows business confidence is at an eight-year high, with business leaders buoyed by rising optimism around both their own trading prospects and the economy in general,” answered Ralph.
“The ongoing energy, security and geopolitical issues certainly can’t be ignored, but it’s easy to focus on the negatives. The reality is that manufacturers have been operating under similar conditions for many years now, and they are plainly thriving. “Exporting can be riskier than trading in domestic markets, but the trade-off is that it can also bring higher rewards. Exporters tend to grow faster than those with a domestic focus, for example, and firms who export say it acts as a catalyst for greater innovation, recruitment, diversification and digitisation.
“Manufacturers shouldn’t wait for any of the current risks to fall away, because more will undoubtedly come along to replace them. That’s not to make light of these challenges, but they can be effectively managed.
“Firms should make building resilience a priority and, actually, exporting is part of that. Operating in multiple territories diversifies your customer base and means you are less dependent on any one market, helping protect your business from any domestic fluctuations.”
Conditions are improving, with inflation on a downward trajectory. How can manufacturers best take advantage of international opportunities?
“Given the volatility and uncertainty that exists, manufacturers must think about these challenges strategically, considering what every variable means for their operations,” continued Ralph. “It’s important to make sure your finance team are fully plugged in with the commercial and operations team, so you’re thinking holistically about any impact.
“That can include everything from how much cash and inventory you hold, to how you negotiate payment terms. Some supply chains remain vulnerable, so consideration should be given to things like reshoring and diversifying suppliers, as well as the terms you agree with your suppliers and buyers.
“Trading internationally can mean longer sales and payables cycles, putting pressure on cash flow. Businesses need to be agile and reactive in order to optimise their working capital. That means continually reviewing inventory levels, lead times, payment terms and the potential for disruption.
“It’s also worth exploring how trade instruments can help mitigate risk if disruption does occur or trade finance to help with working capital.”
Whether you are an experienced exporter or doing it for first time, it can be intimidating to enter new markets. What support is out there?
“Everyone recognises that manufacturing is fundamental to the UK economy and our balance of trade,” added Ralph. “The UK has an ambition to grow exports to a trillion pounds by 2030 and there have been some significant commitments to support the exporting manufacturers who will be vital to achieving this.
“Lloyds Bank is working alongside government and various industry bodies to support more manufacturers to export, because we recognise the important contribution this makes to the UK’s overall prosperity.
“We work closely with the Department for Business and Trade for example, which offers a range of free training courses and has a team of experts who are on hand to answer practical questions on anything from customs rules to taxes and tariffs.
“And we partner with UK Export Finance to provide government-backed support to UK exporters, which can help exporters free up working capital, ease cash flow constraints and scale up operations.
“In terms of identifying the right markets and customers for your products, we’ve created an International Trade Portal, which is available for free to all manufacturers on our website; you don’t have to be a Lloyds Bank customer.
“It includes a database of more than a million buyers and suppliers around the world, as well as a live tender database. We’ve also compiled a library of more than 20,000 sector-specific market reports and over 180 country profiles, including guidance on things like cultural differences, to help firms identify the best opportunities for their business.”
Will the available support help manufacturers overcome any understandable anxieties they may have?
“There are some really good reasons to be positive at the moment. Products with a ‘made in UK’ badge rightly have a global reputation for quality, which gives British businesses a good start when it comes to accessing international opportunities.
“At the same time, experience tells us that those manufacturers that export survive economic ups and downs better than those that don’t. And the support network for exporters is probably stronger than it has ever been. It’s now about exploring the potential to diversify your markets, de-risking your business and
improving your profitability.”
To find out more about the Lloyds Bank International Trade Portal visit www.lloydsbanktrade.com
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