By Daniel Hunter
The confidence of Britain’s small and medium sized importers and exporters has shown signs of improvement after near record lows according to the latest data from the Western Union Business Solutions International Trade Monitor (ITM), produced by TNS research.
In the period October to December 2012, 52 per cent of SME business leaders expressed confidence in the current UK economic climate, an increase from 46 per cent the previous quarter. Equally, 53 per cent were confident that international trade conditions will improve over the next 12 months, an improvement of 10% since Q3.
As eurozone instability diminished towards the end of 2012, nearly a third (31%) of SMEs felt there would be an export-led recovery within the next 12 months. In addition, 54 per cent of SMEs were confident that the international trade aspect of their business would not be adversely affected by the UK economy.
Significantly, the International Trade Monitor also revealed that importers and exporters grew their international activity in the final quarter of 2012. Small businesses are increasingly diversifying their import and export destinations, with almost every global region showing signs of increased trade activity, particularly through exports.
Australasia showed the greatest export increase from the previous quarter, up 16 points to 27 per cent of SMEs having customers based there. SMEs continue to favour North America as the biggest non-European trading partner, up 12% to 39 per cent. One in five SMEs surveyed are now trading with African countries, more than double that from the previous quarter.
Capitalising on emerging market opportunities (81%) and growth in the formation of new SMEs running international operations (80%) are the top reasons for optimism among the SMEs that have confidence in an export-led recovery. Nearly three quarters of those that foresee an export-led recovery also believe that the stabilisation of the eurozone will be a significant factor in driving a return to sustained growth.
“'Cautiously optimistic’ is the best way to describe SME sentiment at the moment," Gareth Heald, UK Finance Director, at Western Union Business Solutions, commented.
“However, by expanding their portfolio of export locations, it is clear that they are diversifying their businesses to try and insulate against a potentially frosty economic winter. Whilst eurozone concerns have eased for now, the wider global outlook is still front of mind for Britain’s small businesses as they widen their reach.
“Confidence has improved compared to a dismal third quarter but we are not out of the woods yet, particularly when considering that there has been a 53% increase in the number of SMEs who have had to reduce staff numbers as a result of being impacted by the eurozone crisis.”
Currency concerns recede
The number of SMEs who have been negatively impacted by currency movements has dropped over the quarter, from 27 per cent to 20 per cent. Currency volatility is a decreasing concern for business owners, having dropped to 49%, compared with 61% in the same quarter in 2011. SMEs are continuing to utilise currency risk solutions, with 40% of SMEs using spot payments, a jump from 33% in the last quarter.
“It is promising that companies are becoming increasingly aware of how to offset currency risk, especially as they look to expand operations with a wider portfolio of global partners. It makes good business sense for leaders to explore every avenue in order to drive greater efficiency and protect profit margins,” Heald continued.
“Currency volatility is an area that can be sensibly managed using a number of solutions widely available to the market. Capitalising on such opportunities to reduce FX risk is essential for SMEs as they move further into an ever-globalising market.”
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