Number of British SMEs engaged in overseas trade declines by half

Brexit one of the key reasons why SMEs are less inclined to trade internationally, according to new research from WorldFirst

Number of British SMEs engaged in overseas trade declines by half

Although the Department of International Trade is pushing its ‘exporting is great’ mantra with various campaigns, it seems as if UK SMEs are struggling with trading abroad.

Indeed, the new Global Trade Barometer report from WorldFirst, the foreign-currency service, has found the number of UK SMEs embracing international trade has fallen by half year-on-year.

This means that the almost three million businesses that were engaged in overseas activities in Q4 2016 fell down to 1.5 million in Q4 2017. In percentage terms, that’s 52% down to 26%.

With 2018 well underway, it’s thought that the exporting disinterest will linger on as 75% of small businesses expect international trade to either stay static or dip further throughout the year.

Given that the UK’s decision to leave the EU has caused concerns for many startups, it’s hardly surprising that market uncertainties from the conscious uncoupling are also responsible for SMEs’ lack of faith in overseas trade.

A 2017 low in the last quarter of the year saw just 29% planning to export in the coming quarter. There has been a Brexit knock-on effect that has also made SMEs more reluctant to put hope in domestic growth too.

Results showed 43% of SMEs in Q1 2017 predicted 5% growth or more in the following quarter, which fell to 38% in Q4 as they looked into the new year. Fortunately, WorldFirst also found some positives to take away from its report.

For instance, it found that in Q4 2016, just 33% of SMEs were positive about leaving the European Union, which climbed to 41% in Q4 2017, perhaps a sign that leaders are keen to push on and make the most of the hand they’ve been dealt.

Moreover, for those still trading overseas in markets such as Western Europe, North America and Asia, WorldFirst insisted growth opportunities can still be found. Average monthly trading amounts rose to £45,536 in Q4 2017, up from £45,000 in Q3.

Commenting on the report, Jeremy Cook, chief economist at WorldFirst, said: “After a year of Sterling fluctuation, inflation fears and obfuscation around the government’s Brexit negotiations, it’s little surprise that our SMEs’ appetite to trade internationally is at rock bottom. There were too many unknowns in 2017 and international trade suffered as a result.

“While hedging data may suggest that it is business as usual for internationally focused SMEs, the truth is that the circumstances they are dealing with are incredibly tough. Short term spikes in sterling are leapt upon in a bid to offset higher input prices caused by higher energy costs and the legacy of the devalued pound while margins remain tight.”

Recognising the few upsides, Cook added: “The only positive to come from such a negative year may be that UK SMEs are seemingly drowning out the Brexit noise. Since the end of 2016, a significantly larger contingent of small businesses feel positive about leaving the EU. The pound is stronger than it’s been since the referendum and many SMEs may finally have plans in place for a post-Brexit world. We can only hope this translates into businesses dusting themselves off and getting back to international trading in 2018.”

While SMEs certainly have their job cut out for them in regards to tackling Brexit, it’s encouraging to see small-business owners take steps to ensure the continuous success of their companies. 

Zen Terrelonge
Zen Terrelonge

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