Small businesses buoyed by global possibilities after Brexit
New research shows growing enthusiasm for international growth over domestic trade but funding and infrastructure challenges cause concern
Research in the aftermath of the EU referendum has found small businesses are more upbeat about their international growth prospects than their domestic expansion. Almost half (47.8%) of more than 1,000 businesses believe they will see growth in international trade activity and only 5.5% think it will deteriorate, according to a survey by East & Partners on behalf of Western Union Business Solutions.
In contrast, only 39.3% are expecting a growth in domestic trade.
This can be explained partly by increased international demand due to the weakness of the pound, but it also suggests rhetoric about a nimbler UK benefiting from being cut loose from the EU monolith is having an impact.
“We thought early on people would hunker down and become inwardly focused and maybe a little bit of doom and gloom would set in,” says Western Union Business Solutions president Kerry Agiasotis. “But there is this sense of optimism around business having more opportunity post-Brexit being outside the EU.”
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Fortunately for UK businesses, brand Britain still seems to resonate strongly and should stand British business in good stead, according to a panel gathered to discuss the findings of the research on Tuesday.
This is despite Liam Fox, the Secretary of State for International Trade, infamously being exposed criticising the work ethic of British business.
“I think it is nonsense to suggest there is any loss of premium to the UK brand – it is a great brand,” says economist and SME Club founder Dr John Ashcroft. “It won’t be assisted by a minister who goes around the world suggesting British businessmen are fat and lazy and play golf on Fridays. We have to be careful that we don’t suggest British manufacturers can’t achieve, that they are not going to make things happen.”
One manufacturer seeking to make things happen is Cornwall-based Rockfish Wellies, a maker of Wellington boots, which now exports to 15 countries after a soft launch in China last year.
“The government campaign states ‘Exporting is Great’ but I would like to say it is really hard work,” says Rockfish founder Jules Aldred. “Exporting can be great and Britain is a great brand to promote but where we have struggled is getting investment to support where we want to be.”
Aldred believes there is a funding gap for small businesses and this is hindering her from seizing on international opportunities, which are greater than domestic opportunities.
“The UK high street is quite sewn up so building a brand here is very difficult but abroad they like to see new brands coming through all the time,” says Aldred.
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She does not subscribe to the view that trading in Europe is easier because of the similar culture and smaller time differences. “If you go to Asia it is so simple; it is a bigger population with vast consumerism and the middle and upper classes are huge,” says Aldred. “I don’t know why anyone would be trying to work so hard in Europe where it is really hard to earn, when you could go to Asia and they are ready to do business and have more spending power.”
Building resilience
Charlotte Chung, a policy adviser at the Federation of Small Businesses, says the members she is the most worried about are the 18% that solely export to the EU.
“What we are concerned about is finding out why they are solely exporting to the EU,” says Chung. “Is [it] the ease of exporting to the single market, no tariffs, and the mutual recognition of regulations?”
Agiasotis says the ever increasingly global nature of business means small businesses can no longer ignore the fact that they have to be in more markets in order to have a more resilient company. “Brexit has exacerbated the issue and in many ways British businesses have rested a little bit on the notion of having access to a much bigger market without having to do a whole lot,” says Agiasotis.
Despite the growing ease with which it is possible to export beyond the EU, there is no denying the Brexit vote will be hugely damaging to some areas of British business.
Sarah Trethowan is the owner of TRAC Services, a consultancy helping clients bring medicines to markets, and is concerned about the impact on the pharmaceutical sector. “At the moment we can get a company a licence for a medicinal product in 28 countries across Europe, will we only be able to get them in one going forward?” she asks. “And if you are a business and you can have a market of 60 million people or 600 million and it costs you the same money, where are you going to go? So it is really important for us that we look to offer our services to the rest of the world.”
Alongside having assistance with regulatory framework, other challenges facing UK businesses seeking to do international trade include poor digital infrastructure.
Aldred has to travel to a friend’s house in a neighbouring Cornish village to download large files. “The big issue and opportunity is in digital infrastructure,” says Ashcroft. “If we want to be the Singapore of Europe then there is no point in losing the signal when there is an electrical storm or it is raining.”
In addition to infrastructure and regulation issues there are a plethora of other areas small businesses have to face up to in order to trade globally, ranging from volatile foreign exchange rates to alien tax systems.
As ever, necessity will prove the mother of invention. “There is nothing like a crisis to bring a country together,” says Agiasotis. “What is going to happen over the next few years is all the creative juice is going to flow and bring all the core competencies and capabilities of this country together to make it truly great.”