Growing your business in a time of uncertainty
“In this world nothing can be said to be certain, except death and taxes” wrote US President Benjamin Franklin in private correspondence in 1789. Indeed today, the only thing that seems to be certain is that there will be uncertainty. The EU referendum of June 2016 has kick-started negotiations and compromises with our European neighbours that is leaving many of those in the business community unsure and unconfident about the years ahead.
The annual Bibby Financial Services Global Business Monitor report reveals that nearly two-thirds of SMEs (65%) are concerned about the state of the global economy and just seven percent say international trade is the greatest growth opportunity for their business.
It is clear that SMEs across the world are concerned about the global economy and the years ahead. As well as the UK’s upcoming departure from the EU, a change in leadership in the White House, and an increasing risk in conflict in some parts of the world, is creating unprecedented geo-political change, resulting in widespread uncertainty at home and abroad.
There is much uncertainty amongst UK SMEs and this has led to delayed investment decisions and lower sales expectations throughout the first half of the year. This declining confidence around the world is leading many SME owners in the UK to retreat and focus on growth in their domestic markets, although this hesitancy hinders opportunity for SMEs to grow in overseas markets.
Research from the most recent BFS SME Confidence Tracker found UK SMEs overwhelmingly viewed Germany (59%) as the most important country to the UK’s economy within the EU, followed by France. SMEs – particularly those who have little experience exporting outside the EU – are drawn to nearby countries with similar trading environments, and continuing to trade with our neighbours needs to be encouraged and promoted.
There are a number of barriers to international trade that SMEs in the UK must overcome, including time-zones (especially as the UK seeks to trade beyond our EU neighbours), cultural nuances, border regulations, legal practices and languages. However, our research reveals that currency volatility is the number one concern amongst SME owners today. Businesses across the world have been impacted by foreign exchange fluctuation over the past 12 months and this is causing many SMEs to move away from trading internationally to avoid such risk. SMEs are able to mitigate risk in currency fluctuation by locking in fixed rates with their customers, although this approach is often sparse.
There are a wealth of new opportunities out there for SMEs. Both seasoned exporters and new entrants alike should look to exploit international business opportunities. Much more needs to be done to highlight the support available from both public and private sectors to help SMEs unlock growth opportunities from exporting their goods and services around the world. Businesses able to make the best of exporting, whether this is finding new customer markets or building new supply chains, have a higher tendency to attain longstanding growth - especially vital as the UK charters its way forward in these uncertain times.
By Craig Durnell, Managing Director of Export Finance, Bibby Financial Services