British SMEs engaging significantly on global scale
(31 July 2015 – United Kingdom) More of Britain’s small and medium enterprises (SMEs) are trading globally and looking beyond Europe for growth according to the latest research-based findings from Western Union Business Solutions.
The International Trade Monitor (ITM) is a quarterly economic confidence survey of more than 1000 UK SMEs engaged in international trade.
For the first time since the ITM was established, the number of SMEs who listed Europe as one of their primary import markets fell below 50 percent.
Three years ago, nearly eight in ten (78 percent) SMEs listed Europe as their primary import market, so this is a significant shift in the way that British businesses are trading.
Now, British businesses are increasingly trading more with Asia, both importing and exporting.
Almost half (44 percent) of SMEs now list China as a primary import market up from just 30 percent last year and for almost a quarter (23 percent) it is also a key export market.
Similarly, nearly one in five (19 percent) list India as a key import market, almost double the number that did in 2012 (10 percent); while export levels remain unchanged (10 percent).
This reflects the growing strength of Asian manufacturers and increased confidence in trading with Asia.
There is also a small increase in trade with North America, over 35 percent of SMEs list the United States and Canada as key import markets, up from 26 percent in 2014.
Almost a quarter also export to North America, which Western Union said is part of a wider trend for SMEs to look beyond Europe and take advantage of the benefits of trading internationally.
Trading outside the Euro-zone brings its own unique challenges, not least having to manage cashflow in multiple currencies, Western Union said.
“Currency markets have been volatile in recent months leaving many SMEs unsure how much they have paid suppliers until the payment date.
“Yet the number who do not know the exact invoice amount until it is paid is falling, with just 25 percent unaware, down from 29 percent in September last year.”
Western Union said SMEs are becoming increasingly sophisticated in their FX hedging and risk management strategies, with a growing number checking currency markets regularly.
“This indicates a growing awareness of currency movements and the impact this can have on cashflow.
“Once again, this approach to currency hedging and awareness of market movements is typically the domain of the big businesses and yet SMEs are demonstrating growing expertise in these areas.”
The ITM shows that SMEs are becoming more sophisticated at maximising their cashflow in general.
Fewer SMEs are reporting liquidity problems with less than a fifth (18 percent) of SMEs cutting spending to cover funding shortfalls, down from 22 percent last year.
Western Union Business Solutions UK managing director Tony Crivelli, said; “The European economy has been incredibly volatile in recent months as the possibility of a Gr-exit and even a Br-exit dominate the headlines. Meanwhile Asia and North America have continued to grow as key trading partners and they are quickly catching up to their European counterpart.
“Despite this volatility, the ITM shows that British SMEs are optimistic about the economy and many are forecasting growth in international markets this year.
“In fact, the outlook is very positive for the second half of 2015.
“As British business looks beyond Europe for trading, foreign exchange hedging and risk management will become vitally important.
“Managing cashflow in multiple currencies is challenging even for the largest organisations, and SMEs need to have the right tools in place to ensure they can manage exchange rate volatility,” Crivelli.