Mid-sized businesses are being too conservative in their export ambitions and are missing out on key growth markets overseas, new research from Lloyds Bank shows.
The bank’s survey of firms turning over between £25 million and £750m, published today, found that almost three out of five firms do not export at all.
Of those, fewer than one in ten is looking to start doing so within the next five years, indicating that more than half of mid-sized businesses are still cautious in considering their long-term export strategy.
Tim Hinton, managing director for SME and mid-markets banking at Lloyds, said mid-sized firms appeared to be overlooking the benefits of exporting even though confidence is at a record high.
He said: “Businesses are focusing their efforts on their UK operations first, looking to reduce their costs and increase productivity before embarking on global growth opportunities.”
A third of businesses said that they are focusing on reducing their costs and a similar number increasing their productivity – reflecting the fact that firms are focusing on performance before looking at exporting opportunities. The figures were similar when respondents were asked for their objectives for the next ten years or the next 12 months.
This lack of focus on exports is despite businesses being aware of the benefits. Around three-quarters said that the main advantages of overseas trade were expanding their customer base while just over three-quarters linked it to increasing sales and profit.
Hinton said: “Although there is a great deal of interest in emerging economies, there is still a relatively low level of export activity to these regions. The picture is slowly changing, but too many UK firms appear to be prioritising markets closer to home over the long term.”
Factors which firms said prevented them from exporting to new markets included not having the right contacts, products not being suitable for overseas markets, not understanding the legal and regulatory requirements and the volatility of exchange rates. Only a small fraction cited access to finance as a barrier to exporting.
Lloyds Bank chief economist Trevor Williams said the latest trade figures showed a worsening trade deficit which would weigh on UK exporters.
“This is in part due to the recent strength of the pound, slow growth in Europe along with geopolitical tensions, and weaker growth in some large emerging market economies,” he said. “These have put downward pressure on UK export growth, despite a rise in manufacturing output over the last year.”
Lloyds’ Business in Britain showed confidence at a 22-year high this summer.
A survey also published today by accountant BDO in Scotland showed business confidence rose strongly in July as firms north of the Border said surpassed pre-crisis levels in terms of hiring intentions.
The BDO Employment Index, which predicts companies’ hiring intentions in three months, rose from 108.8 in June to 109.6 in July, suggesting that job creation will continue to accelerate for the remainder of the year.
Martin Gill, head of BDO in Scotland, said the index meant this year’s university graduates looked set to enjoy better job and salary prospects than those of recent years.