SMEs neglect export potential

SMEs in the manufacturing sector are failing to take advantage of the current favourable export environment, according to a study released by GE Capital.

According to the study, one in five of SMEs in manufacturing put overseas expansion in their top business priorities for the year and just under one in five said that they expect their growth to come from international sales over the next three years, making them heavily reliant on the fortunes of the UK economy. This is marginally more than in 2008, when 19 per cent said overseas expansion was a priority and 17 per cent were planning on growing non-domestic sales.

The findings, which are based on interviews with the owners and mangers of 500 UK SMEs, show that the UK government’s emphasis on an upturn that will be largely export-driven may be at odds with the expectations of small and medium-sized enterprises in the manufacturing sector.

Of those companies that do export, almost three fifths continue to invoice their overseas customers in sterling rather in the foreign currency of their buyer. This is no change since 2008 when only 56 per cent were doing so. As a result, these businesses could miss the opportunity to either increase volumes or take advantage of the weak pound through higher profit margins.

John Jenkins, chief executive officer, GE Capital, said: ‘Now that the long-awaited export-led recovery shows signs of at last arriving, the weakness of sterling against the Euro and the US dollar should provide excellent opportunities for UK firms to maximise their export potential.

‘However, our study shows that fewer small and medium-sized businesses are making the most of the export opportunities than two years ago, despite an incredibly favourable environment.’

Regional variation

While overseas expansion is of low-priority overall for SMEs, the research highlights that there is variation from region to region.

Firms in the West Midlands (16 per cent) East Anglia (12 per cent) and the South East (12 per cent), are most likely to consider expanding overseas as one of their top priorities, while owners of firms in the North and Scotland are the least likely (four per cent respectively). 

The main priority for most businesses continues to be domestic sales, motivating staff and taking additional costs out.

Similarly, there are variations across industry sectors. Owners of manufacturing firms (20 per cent) are most likely to see overseas expansion as one of their business focus areas, followed closely by owners of media and printing firms (18 per cent).

Owners of healthcare and IT and telecoms firms are least likely to consider overseas expansion (0 per cent respectively).