Katja Hall of CBI urges the Government to do more for MSB's international reach.
“The UK may look poised for steady growth for the first time in years, but there remain worryingly few signs the decline in our share of world exports will be turned around anytime soon.
With the UK’s global share less than 4% in 2012, only half of what it was in 1980, we need to actively encourage our high growth medium-sized businesses (MSBs) to embark on the transition from non-exporter to global business.
MSBs already make a significant contribution to our economic well-being, creating jobs and prosperity in all regions of the UK, but not enough are making the most of opportunities overseas. A major piece of the puzzle on this journey for companies is their access to export finance.
“Progress has been made by the Government and private sector to bridge that critical financing gap, but now is the time for a reality check. We simply must find better ways to get export finance to the MSBs who need it most because at the moment we are barely scratching the surface. In 2011-2012, only 52 SMEs received direct support from UK Export Finance (UKEF).
This compares with the 841 SMEs supported through just one of UK Trade and Investment’s (UKTI) products, Passport to Export. With international rivals catching up or even overtaking UK plc, we need to help the many MSBs currently locked out from Government schemes. In this race the tortoise has little hope of beating the hare, so the Government must dramatically accelerate the delivery of financial support.
So how can we turn the situation around? The majority of businesses still don’t know about the schemes the Government offers, with two-thirds of MSBs unaware of UKEF, while 69% of SME exporters are not aware of UKTI. Not only must the Government raise its game when marketing its export products, it must also make sure they are the right ones. UKEF’s Direct Lending Scheme offers support from £5 million upwards. As welcome as that support is, the minimum value far exceeds the initial requirements of new or smaller export initiatives.
“We also need businesses and Government to recognise the importance of patient capital – investments over 5 years or more – if MSBs are to successfully plant strong roots in new markets. Short-term finance is often necessary to deliver on new orders, but if a forward-thinking company wants to lay the groundwork for continued success, access to long-term finance is the first building block. In that respect, the sooner the Government can get the Business Bank up and running, the better.
Even as global opportunities flourish there are still many hurdles for MSBs to overcome when ‘internationalising’ their business – language differences, a lack of new market knowledge, there are many factors that can prove decisive.
But if the UK is going to successfully rebalance its economy away from consumer and Government debt, there must be a real step-change to support those companies who will ultimately drive our future prosperity.
We’re also calling for a review of the unintended consequences of the UK’s Bribery Act which leaves many MSBs hamstrung before they have even started to export. Corruption is clearly wrong and distorts markets, and we should have strong laws to stop it, but the current restrictions of the Bribery Act give a damaging impression that it is difficult to do business with British firms and in some cases, makes doing business in some overseas markets impossible.
The UK’s growing MSBs will be at the forefront of efforts to rebalance our economy towards greater exports making the most of the significant international opportunities out there. Progress has stuttered but if finance for MSBs to export can reach the companies that need it most, many of them will make headway in these lucrative new markets and could become our future global businesses.”
Katja Hall is the CBI’s chief policy director and Kim Hayward is international liaison partner at BDO. The CBI and BDO have published a joint report, ‘Go your own Way’ highlighting the challenges for MSB exporters and offering advice on how best to make the most of international opportunities, moving from a non-exporter to global business.
UKTI and UKEF respond In response to this blog, a UKEF spokesperson commented:
UKTI and UKEF respond
In response to this blog, a UKEF spokesperson commented: