UK banks are able to lend exporters vital expertise, finds Andrew Collier
SELLING a product or service overseas can be rewarding, but it can also be challenging and needs discipline. All markets are different; cultures vary; you will probably be trading in a different currency; and you will be dealing with a number of risk factors all at once.
None of this should put people off, but it does mean that rigorous systems need to be put in place to ensure, for instance, that you will be paid fairly and timeously and that variables such as currency fluctuations do not wipe out profits.
Because of their international presence, banks are well placed to take a global view of the trading landscape. “At present, people are nervous about Europe,” says Mark Ling, head of trade supply chain financing, corporate and institutional banking (CIB) for RBS. “There is a particular nervousness about the PIGS countries [Portugal, Ireland, Greece and Spain] at present, with people watching what is happening on a week-to-week basis, and in some cases the wisdom of open account trading is being questioned. Those nerves make things far more of a challenge for everyone.”
On the other hand, he adds, markets such as Asia and Latin America offer plenty of opportunity. “We are seeing more activity in the Middle East, especially around oil and gas, and the Far East is doing well. We have seen a bit of a slowdown in China, partly because of the recent change in leadership, but it is still strong.”
Mark points out that despite the current hiccup, opportunities in China in particular remain staggering. “There is a burgeoning middle class there of about 300 million people. The real opportunities in China are in brands.”
The Chinese economy still displays an astonishing economic robustness and desire for growth. The country will complete building a new skyscraper every three days for the next five years. There are now more than 870 million mobile phone subscribers in China, and its lingerie market alone is worth £2.5 billion annually.
RBS is well geared up to provide specialist advice on emerging markets: it employs Chinese nationals, for instance, both in China and here in the UK. It also provides tailored support to its corporate clients. “One example of this is the Weir Group based in Glasgow,” explains Mark’s colleague Craig O’Donnell, regional director CIB trade origination Scotland, for RBS. “A lot of its contracts require various types of bonds to be put in place and we help with that process. At any one time, they may have several hundreds in place across the globe.”
Other emerging markets also offer great potential. India also has an expanding middle class, creating a demand for high quality goods. If the state of a country’s economy is measured by the number of mobile phones in circulation, it must top the list: India has nearly 900 million.
Export opportunities in Latin America remain largely commodity based, but Brazil in particular is a star performer – the car market there is going up by 30 per cent a year. This sort of growth also suggests a demand for the kind of premium products and services Scottish companies can offer.
There’s little doubt that Scotland has the economic base to capitalise on many of the opportunities thrown up by these markets. “Oil and gas, for instance, is still strong,” says Craig. “Given its skills base and expertise, Aberdeen is poised to pick up a lot of work.”
Mark says that bigger companies, such as multinationals, tend to be less nervous than smaller compatriots when it comes to exporting. There is also plenty of assistance available to companies of all sizes.
“For instance, the banks can provide standing letters of credit which can protect clients as well as financing of receivables and credit insurance. These take some of the risk away. And then there are products such as hedging, which protect against foreign exchange risk.”
Mark says all UK banks are keen to support business and there is a recognition of Scotland’s strength in terms of offering premium products and services. “We all have expertise focused on selling abroad.”