By Max Clarke

Export trade is booming in the UK, with almost half of small to medium-sized firms trading internationally reporting an increase in the export side of their business, according to new research from independent invoice financier Bibby Financial Services.

Indeed, while some 28 per cent of firms also reported an increase in the import side of their business, the trade deficit could be set to shrink as exporters take advantage of a weak pound.

The economic downturn has had a positive impact on one in five businesses, forcing them to refocus their trading activity towards international markets and suggesting that UK firms have been flexible and agile when looking to grow their business and increase revenue: a finding evidenced by the Office for National Statistics figures that showed the highest annual rise in manufacturing in 20 years.

The research, conducted among 300 small and medium-sized importers and exporters across a range of sectors, also highlights the strengthening of the euro as a positive factor, with 14 per cent of firms feeling this has enabled them to remain price competitive against rival firms on the Continent.

Andy Meadwell, international trade finance spokesperson for Bibby Financial Services, says:

“The UK Government has placed a huge emphasis on the role international trade will play in driving the UK out of recession and reducing national debt. With the latest ONS figures showing a contraction in GDP of 0.5 per cent over Q4 2010, and Britain’s trade deficit reaching a record high towards the end of last year despite a growth in exports, there is an obvious need to drive international trade even further and promote the price competitiveness of UK goods and services on the world stage.

“These findings certainly bode well for those firms trading internationally. However, businesses need to take a proactive approach to international trade, with many missing out on valuable opportunities through a fear of investing or lack of funding. The days of a strong pound are over, and pricing for goods made in the UK is now hugely competitive. With domestic demand weak, there really is no better time for UK businesses to look at developing growth strategies in international markets.”

However, the research also demonstrates some negative trends.

Over half of firms trading internationally feel the economic downturn has had a significant or moderate impact on their business. With GDP contracting during Q4 2010, international trade could be affected by weak demand for imported goods.

Furthermore, 28 per cent feel that access to finance has diminished for UK importers and exporters over the past 12 months.

A number of key factors for business failure were also highlighted in the research, with over a third citing the fluctuating exchange rate as a problem when trading overseas. While the sterling’s relative weakness provides opportunities for exporters, firms looking to import goods, particularly from areas outside the EU on which import duties are imposed, struggle to remain price competitive against domestic goods and services.

Over a third (34 per cent) state overseas red tape as being a barrier to trade, with 18 per cent viewing issues associated with securing new business as being a key factor.

Andy concludes: “Trading internationally comes with its own unique set of challenges, and businesses should review pricing strategies and research markets thoroughly before entering them in order to ensure they are as competitive as possible. Funding for businesses looking to move into overseas markets and develop growth strategies is still limited, and in order for those involved in international trade to develop and make a dent in the trade deficit both the Government and lenders must ensure firms have access to funding to support this growth.”