By Daniel Hunter
Businesses that do not target foreign markets are severely limiting their potential for growth, warned experts at the International Finance For Importers And Exporters seminar.
But economist Roger Bootle, also speaking at the event at Old Trafford last week, said that businesses must also anticipate the break up of the Eurozone.
Speaking at the seminar was Tony Brown of UK Trade & Investment, who said that international trade was crucial for growth.
“Focus on just the UK and that’s less than 1% of the global market. The customer spread is dangerously limited," he said.
"Nor should businesses shorten their product’s lifespan by restricting themselves to a single market. Your product might have dropped off in one market, but is about to reach its peak in another. You can use foreign markets as an early warning indicator of opportunities and threats where the same or a similar product is more established.”
Peter Flynn, corporate manager of Liverpool-based Bibby Financial Services which helps SMEs finance overseas said that the fear factor was holding British businesses back from attacking foreign markets.
“Barriers to exporting include a lack of knowledge and a lack of experience,” he said, “though you could subtitle both of those as ‘fear’. For exporters, the other big fear is finance: where do I get finance, how do I get it, and what finance do I need?
“The simplest way to operate in a foreign market is to get paid in the currency of that market and hold a bank account there. You can gain and lose on exchange rates. It’s all about hedging your risk. It’s also absolutely vital you credit check your customers and have credit insurance incase they default. When it comes to dealing with risk, 39% of importers and exporters insure themselves while 32% get advanced payments which makes life a lot easier.”
Michael Low, business development manager at Moneycorp, said that foreign exchange fluctuation is commonplace and can have a big impact on sent or received payments.
“SMEs’ profits have already been squeezed by higher input costs and rising inflation and so cannot afford to take a percentage hit from currency fluctuations,” he said. “There are several ways round this — by taking advantage of favourable exchange rates, protecting against adverse currency movements and securing budgeted exchange rates using tools like options, spot contracts and flexible forward contracts as well as market orders where we target a rate of exchange above or below the current market price.
“Dollar vs sterling for the past 12 months has been much more simple to read than during the credit crunch. It’ll be 1.60-1.67 next year, rather than the 1.50s like this year, then 1.63-1.70 in the latter half of 2013. Next year, for sterling against the euro we’ll see something above 1.30, great for importers, but really difficult for exporters as the market is moving against them.”
The keynote speaker for the evening was economist and MD of Capital Economics, Roger Bootle. In his summary on the outlook for the euro, he warned that companies should prepare for the break-up of the Eurozone,
“I’m not so much a euro-sceptic as a euro-septic. The euro needs to break up to allow the countries of the Eurozone — which have suffered due to factors such as excessive levels of public sector debt, and pitifully low GDP growth — to recover," he said.
"Without this they will be stuck in depression for decades to come. More likely, a partial break up will occur before too long, possibly starting with a departure by Greece.”
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