Conference discusses role of SMEs in Britain’s economy

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Key figures from industry and academia convened last week to debate what Britain can do in order to increase its competitiveness.

Chaired by John O’Sullivan, Britain economics editor for The Economist, the conference — part of the Reinventing Britain series of debates — focused on the themes of growth markets, immigration and industrial policy.

Panelists also appraised SMEs, discussing ways in which their input into the economy could be improved.

Office for National Statistics data states that 99.9 per cent of businesses in the UK are classed as SMEs and 48.7 per cent of all public turnover is derived from them.

The possibility, however, that SMEs might be underachieving as a result of failing to consider themselves as ‘global from the outset’ struck a chord with the panel.

Sir Roger Carr, president of CBI, said: ‘Lots of successful small engineering companies have worked out, like in Germany, if you’ve got a product and it’s what the world wants, and you specialise and focus the marketing of that product — you can be a global player.’

A report published by the Department for Business, Innovation and Skills (BIS) in 2010 outlines the benefits of going global, stating: ‘Firms which are entering export markets for the first time experience a 34 per cent long-run increase in productivity (total factor productivity) in the year in which they enter, and an increase of five per cent in the year following entry.’

A good example of SME export success comes from west London where Brompton has been designing and building its fold-away bikes since 1988 and is now active in 33 export markets.

Emerson Roberts, Brompton’s sales and marketing director, told The Engineer, ‘Our overseas sales now account for 73 per cent of our output; over the first half of the financial year, sales to our Asian markets are more or less on a par with, and sales to Europe are some 60 per cent higher than, UK sales.’

Despite this, 39 per cent of medium-sized businesses exported in August 2011, compared to 31 per cent of small-sized ones and 22 per cent of micro-enterprises. Manufacturing accounted for 45 per cent of that figure and, on average, exports accounted for 21 per cent of turnover for manufacturers that export.

The panelists agreed that encouraging SMEs to make the transition to world markets requires action from government, academia and SMEs themselves.

Lord Stephen Green, minister of state for Trade and Investment, believes it is a collective challenge, saying: ‘Trusted advisors of SMEs including their lawyer, bank and accountant, should all encourage them to think about export opportunities.’ 

He also accepted that government, and specifically the Export Credits Guarantee Department, had a crucial role to play in setting out advantageous trading policies that will attract foreign buyers to UK markets. This may involve insuring UK exporters against non-payments by overseas buyers or guaranteeing bank loans to overseas investors.

UK exports hit a record high of £25.5bn in August this year, but this was tempered by statistics that showed manufacturing output dropping 0.3 per cent.

In a statement issued at the time David Kern, chief economist at the British Chambers of Commerce said: ‘The government must urgently implement its plans for credit easing, with a particular focus on small- and medium-sized businesses.’

Speaking to The Guardian, he added that Britain’s exporters must make every effort to diversify sales towards economies such as India, China and Brazil.

Speaking at the debate, Dick Olver, chairman of BAE Systems, said Tier 1 companies have a significant part to play too.

He said: ‘I believe business has a responsibility to help and work with SMEs. We work with them at all levels, including pulling through innovation.

‘Large companies have big responsibilities and our company has 7,500 companies in its supply chain, with 2,500 of these fitting the SME definition. The other 5,000 will have SMEs in their supply chain.

‘If BAE sells $10m of equipment to India, we’ll take a large number of SMEs with us.’