Survey reveals UK engineering dependent on export market

Posted on 26 May 2015 by Jonny Williamson

UK-based engineering companies which export are heavily dependent on overseas trade for their continued survival, with more than a third generating over 80% of turnover from these foreign markets, according to a survey published today.

The survey of UK engineering and manufacturing executives by accountants and business advisers BDO LLP and the Institution of Mechanical Engineers (IMechE), found that the largest overseas markets for UK manufacturers were Western Europe (75%), followed by North America (54%).

India is one region that stands out as proving difficult for manufacturers, with only 8% of companies exporting to there.

The growing success of businesses breaking into China was also illustrated with just under a quarter selling goods there, the third largest single market for UK firms.

Two regions that stand out as proving difficult for manufacturers are India and South America, with only 8% and 12% of companies exporting to these destinations.

These are, however, clearly valuable and sought after markets with more than a quarter of companies targeting these regions for future trade.

In contrast, Africa is an area that holds limited interest for firms with only 11% exporting there and only 12% intending to make the continent a target in the future.

The UK is the 10th largest goods exporter in the world and the vast majority of engineers surveyed (78%) believe that it is the quality of UK products that holds the most value for overseas customers, in stark contrast to price (only 20%).

However, the need to continue impressing the relative quality of UK goods in an evolving global market was obvious, with very few respondents believing that the ‘Made in Britain’ stamp had any particular cachet with customers.

With product quality being the key to export success, constant innovation and re-invention is the prevalent strategy needed to maintain a seat at the global export table.

In order to achieve this, research and development (R&D) is crucial. Worryingly, however, just under a third (28%) of those surveyed felt that their company wasn’t spending enough on R&D to keep its competitive position. This is of particular concern given the increasing sophistication of low cost economies such as India and China closing the gap on UK product quality.

Tom Lawton, head of manufacturing, BDO LLP
Tom Lawton, head of manufacturing, BDO LLP.

Head of manufacturing at BDO, Tom Lawton commented: “Economic weakness in the EU has created significant headwinds for exporters over the past few years placing increasing emphasis on emerging market, so the fact that firms are having problems cracking key geographies such as India and South America is of concern.

However, China is a good example of how export development can work well and the Government must do everything it can to facilitate expansion into these foreign markets, be it through favourable tax breaks to exporters or direct support from departments such as UKTI.

“However, companies must also play their part by maintaining global competitiveness through reinvestment into their business and products. The world is becoming an increasingly competitive place and this pressure is only set to increase.”