24/08/2012

By Mark Riches, spokesperson for Bibby Financial Services

Despite the fact that the UK trade deficit widened to a 15 year high in June, according to the latest figures from the Office for National Statistics, opportunities for small and medium-sized enterprises (SMEs) to penetrate overseas markets and increase their order books remain very much available.

The ongoing uncertainty and instability in the eurozone has undeniably prompted many SMEs to revise their international trading strategies, with many looking further afield. Indeed, the Office for National Statistics has revealed that the EU is, for the first time, no longer Britain's main export market. In the three months to May, 51 per cent of British exports were distributed to countries outside the EU while exports to countries within the EU fell by 7.2 per cent – with businesses increasingly turning their attentions to fast-growing emerging economies in Latin America and Asia.

Rallying call

The Government has called on the SME community to help drive the UK’s export-led recovery, with the Chancellor challenging companies to double exports to £1trillion by the end of the decade. With this in mind, it is encouraging to find that a recent study among 1,000 UK SMEs by Bibby Financial Services, revealed more than four out of five (83 per cent) firms remain open to doing business internationally regardless of the instability of European markets.

And, David Cameron himself appears committed to the cause. Since the start of the year, he has carried out numerous overseas trade missions, including meetings with industry leaders in Indonesia, Mexico, Japan and Malaysia. But the Government’s call to arms can only be answered if SMEs’ plans for international growth are supported and the banks’ ongoing reluctance to open their vaults to SMEs is addressed.

Risk-averse banks

Last month an international trade report by The Institute of Export and Trade found that inadequate access to finance remains one of companies’ biggest barriers to growth, with the lack of support from banks forcing 66 per cent of firms to dip into their own finances to drive business growth.

Despite being well-intentioned, initiatives such as Project Merlin and the Enterprise Finance Guarantee have not succeeded in forcing banks to loosen lending criteria and boost lending levels to SMEs.

The National Loan Guarantee Scheme was recently superseded by the ‘Funding for Lending’ scheme, in an attempt to generate more lower cost loans for small businesses, but when you consider that bank lending has fallen in every month since this Government has been in power, questions must be asked as to whether this latest scheme will be any different to previous initiatives.

Exporters should be considering other viable sources of finance, including export factoring, which provides immediate upfront funding against outstanding domestic and overseas sales invoices.

Cultural differences

Business owners and managers should also not overlook a pool of potential international customers because of fears associated with financial, cultural or legal differences. Despite many firms being open to trading overseas, perceived financial and cultural barriers, as well as stringent export regulations can be seen as obstacles to growing a national company into an international operation.

However, providers of export factoring such as Bibby Financial Services, house expert teams of experienced, multi-lingual staff, who will liaise with overseas customers for payment on the client’s behalf and help them overcome any potential cultural and communications barriers. As well as undertaking the collections and credit control, bad debt protection ensures overseas trade is conducted securely.

Best of British

Accessing the finance needed to fund overseas activity will enable firms in the UK to take even greater advantage of opportunities on foreign shores. But businesses need to be aware there are facilities out there to overcome the challenges associated with trading internationally.

Despite economic stagnation in the EU, there is still a strong demand for quality British products from all over the globe.