Research reveals smes that export grow twice as fast as those that do not

Despite growing overseas demand for British goods and services, new research for UK Export Finance reveals British SMEs are still not reaching their export potential

Research reveals smes that export grow twice as fast as those that do not

Despite growing overseas demand for British
goods and services, new research for UK Export Finance reveals British SMEs are
still not reaching their export potential

To mark its centenary year, UK Export Finance (UKEF), the UK government’s export credit agency, has conducted new research which reveals that companies with only domestic customers grow less than those that sell abroad. This is particularly true for SMEs, as the research shows that those that export significantly outperform those that do not. 

Out of more than 1,000 UK SMEs surveyed by YouGov for Capital Economics, businesses with solely domestic customers reported annual growth of 8.4% over the last 5 years, whereas this increased to as much as 15.2% for those that export. 42% of SMEs said that exporting has increased profits by up to 20%, and for 9% of SMEs surveyed, exporting
has increased profits over 20%.

Financial considerations prove the most common
barrier to exporting

Despite this, an
estimated 19% of SMEs believe they could export but still do not
, with the majority citing financial barriers as a major factor. Late payments are the most critical issue: while 52% of payments are made at the point of supply, 45% of sales happen on credit.

This means that at any one time, SMEs are owed an average of £64,000 in late payments, with 11% owed between £100,000 and £250,000. This can cause a damaging ripple effect that has a greater impact on SMEs compared with larger businesses.

Other key challenges to potential SME exporters include difficulty managing exporting procedures and paperwork, the length of time it takes to get paid by foreign buyers and the risk of not being paid at all.

UKEF’s aim is to help companies of all sizes overcome these barriers to exporting. Last year alone, it supported over 250 businesses in numerous ways. From offering attractive financing terms for overseas buyers to help businesses win contracts, to providing insurance to safeguard against the risk of non-payment, UKEF helps companies from all sectors to maximise the opportunities available internationally. 

Secretary of State for International Trade, Rt Hon. Liz Truss MP, said: “Finance is a key barrier coming between SMEs and their export potential. If small businesses were to export more, Britain would see even more stronger economic growth.

“In its centenary year, UKEF continues to enable companies from across the UK to expand their global reach by helping them succeed abroad. That’s why it is at the heart of my plan to get businesses ready to trade as we leave the EU.”

Despite appetite for finance options, awareness
is an issue

However, over half (58%) of UK SMEs are not aware that trade finance
. Instead, the majority rely on credit cards, hire purchase and government grants to fulfil their potential. 60% of potential exporters said a reasonably priced service that insures against customers who do not pay and lends capital while they await payment, would be useful. For SMEs that are refused support due to their lack of export experience, UKEF’s financial services can be invaluable. 

Louis Taylor, CEO of UK Export Finance, added: “The right finance and insurance can make all the difference for a company that is looking to sell overseas. There’s a wide range of specialist support on offer from both private sector providers and from UK Export Finance working with private sector providers, and we’re here to help UK companies access that support and realise their global ambitions.”

UK saturation results in higher growth outside
the EU

An increasing number of SMEs have turned to exporting due to saturation in their own markets, highlighting the importance of international trade opportunities. When looking where to export, the majority still favour the EU.

However, there is growing interest in markets outside Europe. Survey data collected since 2010 shows that UK SMEs are exporting to Canada, South Africa, US and China at a faster rate than anywhere else in the world.

Interestingly, research gathered by Capital Economics indicates that SMEs grow slightly faster if they are focused on markets outside the EU. SMEs that derive more than a quarter of their revenue from non-EU exports report growth of 12.9% per annum, versus 12.2% for those that export solely within the EU.

Small businesses benefit most from exporting

The export potential for small businesses is greater than ever. The research indicates that small businesses (those with fewer than 50 employees) have benefitted from the fastest growth in revenue through exporting. Small businesses that export grew their revenue by an average of 10.9% annually over the past five years, compared to average growth of 7.4% for those which did not export. Since 2000, the number of UK small businesses has grown by 25%. In comparison, the number of large businesses (more than 250 employees) has grown by just 4%.

In summer 2019, several new initiatives were announced by the UK Government to unlock finance for SMEs exporting to emerging markets. These included: the Small Deal Initiative, to back exporters undertaking the smaller contracts that underpin British trade; extending financial support to firms in exporters’
supply chains as well as exporters themselves; and the General Export Facility, to cover general cashflow requirements for exporters, rather than just costs related to a specific export deal.

By helping SMEs overcome some of the barriers they face around finance, the UK could increase its export levels, and in turn, economic growth. The Government’s overall ambition for the government is to raise exports as a percentage of GDP from 30% to 35%, and UKEF’s support is central to achieving this.  

Businesses across the country can find out more by contacting an Export Finance Manager or visiting


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