The UK risks missing its target of increasing exports to £1trillion by 2020 unless it abandons its misplaced focus on boosting the number of small and medium-sized enterprises (SMEs) who export their goods and services and instead concentrates on helping existing exporters, a think tank has warned.
A new report by the Legatum Institute, an international think tank based in London, highlights figures that show that nearly half of UK goods exporters stop exporting within 6 years.
The report puts this failure down to a misplaced government target of trying to find 100,000 new exporters by the end of the parliament. This target incentivises officials in UKTI to find new businesses rather than to work with existing exporters to help them establish permanent footholds in some of the countries they are operating in.
The paper highlights the export challenge in the UK:
- The UK has increased its total exports by just over 3%, or £15billion, since 2011, yet is lagging well behind other developed countries such as Germany, for example, which recorded an increase of 6.5% in exports in 2015 alone
- Many SME exporters have a tendency, especially when starting to export, to limit themselves to one or two markets, predominantly in the EU. China is the UK’s 6th biggest export market while India has fallen in one year from 11th to 17th
- The constant change of trade ministers (five since 2010) and the switch between businessmen and politicians has made it difficult for UKTI and the export agenda to assert itself in the face of influence from other government departments
- The government could boost the total value of exports by holding automatic cross-sector trade missions when a UK multinational company has just signed a major deal
- The government should view exports of services as equal value to exports of goods, especially when services account for 79% of the UK economy
- Government export targets should be broken down into sectors so that different departments and ministers can be held to account and to take into consideration different business cycles of various sectors
- Trade minister should be made a Cabinet-level position and the government should aim to secure a lengthy tenure for trade ministers to encourage long-term planning
- Allocating a proportion of the £1.3 billion Properity Fund to work out how to better establish trading links with countries transitioning out of aid dependency
"However, the current obsession with trying to identify 100,000 new exporters by 2020 actually acts as a barrier to the UK meeting the £1 trillion mark. Instead of encouraging UKTI to go an inch deep and a mile wide with their focus on new exporters, the government should reset its strategy and concentrate on those companies who already have a foothold in markets around the world.
"Focusing limited resources on encouraging cross-sector trade missions whenever a UK multinational seals a deal will ensure the UK maximises the value of its exports."