Scottish exports still lag UK

UK BUSINESSES are expecting to boost profits by pushing into emerging markets, particularly China and India, in the next two years, a survey has revealed. But Scottish firms will continue to lag behind their UK counterparts in making headway into the "BRIC" economies – Brazil, Russia, India and China – as current exports to these markets are too low.

• Hywel Ball, Ernst & Young: "There are huge opportunities for Scottish businesses" Picture: Jane Barlow

The Ernst & Young Item Club survey, Competing for Growth, found that UK company bosses anticipate making significant shifts from trading with cash-strapped economies in Western Europe and North America to emerging markets.

The study - which canvassed the views of 1,400 business leaders around the world, including 80 headquartered in the UK - found that during the downturn 64 per cent of UK firms said growth was being generated from trading with Western European countries and 24 per cent from the US and Canada.

But this is set to change - in two year's time, just 48 per cent of growth will come from Western Europe and 15 per cent from the US and Canada. Instead, 29 per cent of UK companies cited China as a key source of profitable growth in the next two years, up from 11 per cent for the last two years, while 16 per cent cited India, compared with 9 per cent for the last two years.

But China is the only BRIC country on a list of the 20 top export markets for Scottish firms and Hywel Ball, Scottish managing partner at Ernst & Young, warned that Scottish firms have some way to go before they can catch up with UK businesses that are growing international trading aggressively.

He said: "The most recent statistics from the Scottish Government show that Scotland's exports to China at 290 million are worth less than a third of its total exports to Ireland at 960m, while India doesn't even feature in the country's top 20 trade partners.

"There are huge opportunities for Scottish businesses in those markets and it is imperative the country's future is played out on a global stage. We have far to go, though. Scotland's exports lag behind that of the rest of the UK and there are many logistical and regulatory hurdles it has to overcome if it is to catch up.

"Those companies with strong and far-reaching export markets continue to weather the recessionary storm better than those focusing on domestic or traditional Western markets, and their success should serve as an incentive to others."

The shift overseas will also be bad news for the coalition government's plans to see the private sector economy soak up an estimated 500,000 public sector job losses, the report warned.

Cost reduction remains high on the agenda for most organisations around the world, with 80 per cent of UK businesses estimating they would cut budgets from up to 5 per cent to more than 20 per cent. Almost 50 per cent of UK respondents said they plan to reduce headcount.