With a light shining on international trade opportunities as part of Scottish International Week this week, Scotland has an opportunity to take stock of its export potential and draw on its success stories in a drive to meet bold new targets set for the nation.
The most recent HMRC stats for Scotland indicate that international exports continue to grow, increasing from £24.1 billion in 2016 to £28.6bn in 2017 (18.5 per cent). The first half of this year has seen exports reach £14bn, a 1.2 per cent increase on the same period in 2017.
The UK government’s new Export Strategy sets out ambitious goals to increase the value of exports as a proportion of UK GDP to 35 per cent.
Supporting this is entirely consistent with Lloyds Banking Group’s Helping Britain Propser Plan where we have committed to help 25,000 new exporters trade by 2020.
Last year £620bn of goods and services exported by British companies accounted for 30 per cent of our GDP, with UK exports at a record high. However, there are still businesses out there that we can help on their exporting journey. The Department for International Trade estimates that 400,000 UK businesses believe they could export but don’t.
There is no doubt that questions still exist over the shape of the UK’s future trade relationships with Europe and elsewhere, but with the picture expected to remain unclear for some time, “wait-and-see” is simply not an option.
Looking beyond traditional domestic opportunities is crucial. So it is heartening to see Scottish firms determined to get on with doing what they do best – taking growth opportunities when they arise while keeping an eye on external risks.
- Maximising opportunity and mitigating risk
Currently only 8.8 per cent of UK businesses are active exporters so to deliver the growth required we need to understand what drives firms to export and the barriers they perceive.
Five key challenges were identified by the government when developing its Export Strategy, these included: Access to finance; Limited networks and contacts; Market access issues; Lack of capacity and knowledge; and limited global awareness of the UK’s strengths and capabilities.
There are many organisations out there to help mitigate these challenges and risks, including Scottish Development International, the Chambers of Commerce and of course Bank of Scotland. Businesses can tap into the resources these parties have to offer to find the most up-to-date information on the new markets before they take any action.
Bank of Scotland’s online International Trade Portal, was designed specifically to help Scottish businesses identify and prioritise the best overseas opportunities for their products or services and the potential pitfalls they might face.
A comprehensive examination will not only look at the prospective region’s potential demand for a firm’s product or service, but also the wider macroeconomic environment and cultural landscape the sector operates within. Approach is key, and observing and adhering to local sensitivities can make all the difference.
It’s also important for exporters to understand the legal and technical requirements they are expected to meet. Trade tariffs, quotas and import duties differ greatly depending on what part of the world you are in. A great example is China. It has what is officially termed ‘a socialist legal system with Chinese characteristics’, based on both statutory law and custom. Having the correct insight to navigate an unfamiliar system such as this is imperative.
- Support to grow
Alongside the practical challenges, exporting also carries financial risks, for example waiting longer to get paid, which can increase pressure on working capital. Partnering with a bank with global trade expertise means firms can access a range of specialist funding options and working capital tools that can boost their chances of success.
There is a huge range of financial solutions available to help support exporters, such as invoice finance, export finance and trade finance. The right mix of these solutions protects working capital and makes taking the step to enter a new market a more secure experience.
The future success of the Scottish economy depends on businesses of all sizes and sectors looking to overseas markets for growth, but they don’t have to go it alone.
- Colin Walls, regional trade director at Bank of Scotland