10/04/2014

By Karen Fraser, Director, Advertising Association

This week is Export Week, where we celebrate Brand Britain and focus on how we can inject further growth into our economy by capitalising on the long-term opportunities of international trade. While there is a clear desire among most businesses to increase exports, the most recent government data shows that only 19 per cent of UK SMEs currently export, compared to 25 per cent of EU SMEs. So what is actually holding SMEs back from exporting and what role can advertising play to encourage further investment and growth?

Improving the UK’s export performance is central to economic recovery and future prosperity, highlighted by the Chancellor’s bold target to double UK exports to £1 trillion by 2020. In the government’s most recent SME survey, companies identified a sales-orientated export strategy as the second most important aspect in driving growth (69 per cent), behind only increasing the skills of their workforce (75 per cent).

Yet many challenges lie ahead for SMEs looking to export. Elements taken for granted when doing business in the UK such as language, finance, regulatory concerns and securing a loyal customer base can suddenly seem like distant luxuries when businesses are looking to expand overseas.

For many, advertising can hold the key to breaking into these new markets. Crucially for businesses, advertising creates demand for brands and matches customers with the service or product they are searching for. Through driving demand, advertising optimises returns and promotes further investment in exporting goods.

A recent report from the Advertising Association highlighted that the value of advertising for SMEs cannot be ignored. In fact, for every additional £1 spent on advertising, an SME would benefit nearly eight times as much relative to its size as an equivalent £1 spent by a larger firm. Despite this, only one in three are currently advertising.

So what’s holding them back? Our survey of 1000 small businesses found that, broadly speaking, the reasons SMEs are reluctant to advertise are two-fold: two-thirds believe advertising is ‘too expensive’, and SMEs feel less able to make the most of their advertising.

Luckily for SMEs, the UK is an advertising services leader. We have some of the most-awarded advertising agencies in the world, and the most developed digital economy in the world. As a consequence, SMEs in the UK have a noteworthy advantage on their overseas competitors. Digitisation has also democratised advertising, meaning that even the smallest companies can benefit by engaging brand new international audiences — without the need for a physical presence in the market.

However, a strong and consistent message from SMEs in the UK is the need for more structured assistance to help them advertise. Other governments around the world have provided such support through a range of interventions, for example Australia’s Export Market Development Grants scheme reimburses up to 50% of eligible promotional expenses above AUS$10,000. Providing SMEs meet the qualifying criteria, grants can be used to pay for overseas advertising and to hire marketing consultants in foreign markets. This mirrors similar schemes taking place in countries across the world including New Zealand, France, Finland and Hungary.

SMEs have the potential to play an even greater role in the UK’s economic resurgence, and it is clear that they want to export to new markets. However, more now needs to be done by both the government and the advertising industry to help SMEs access existing support and unlock the value gained by UK exports. Even if SMEs could raise their export performance to EU average, it would be worth £40 billion to the UK economy. This week, let’s not only focus on the Chancellor’s future target but also what we can do now to expand the UK’s export potential.

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