Cargo ship

The small business export gap is causing the UK to lose out on a potential £141.3 billion, more than the combined UK Government budgets for health and defence in the last year.

Despite the government’s plans to help UK businesses succeed in the post-Brexit world, only 5% of small and medium sized enterprises (SMEs) have plans to start exporting in the next five years, according to a new study by World First.

The report, Thinking Global: The route to UK exporting success, found that by trading their goods and services internationally, the typical exporting SME added over £287,000 in revenue over the last 12 months.

One in 10 (9%) of SME exporters also say that exports had boosted their profits by more than 20%. This means that even if only the 5% of UK SMEs looking to export in the next few years did so, they could add £33.7bn to UK GDP – a 6% boost to the overall level of exports from the UK economy in 2015.

Jonathan Quin, CEO and co-founder of World First said: “The value of the export opportunity to the UK economy is enormous and so much more needs to be done for the UK to fulfil its potential as a trading nation. But with only 5% of UK SMEs considering exporting over the next few years, it is clear that the UK’s SMEs need much more in terms of inspiration and support to seize the growth opportunities that exist in global markets.

“The creation of a Government Minister for Scale-ups would go a long way in supporting businesses in their international development and drastically improve this figure.”

Brexit, culture and language identified as key barriers to exporting by SMEs

Whilst significant opportunities from exporting exist, SMEs identified a number of barriers impacting their ability to export more with language and culture proving a persistent problem.

Language was labelled the top barrier by SMEs looking to enter the Asia-Pacific region (23%) and South America (21%), and the fourth highest barrier for Africa and the Middle East (20%). Similarly, culture was named as the biggest barrier for SMEs wanting to enter Africa and the Middle East (24%).

UK SMEs have reacted to the decision to leave the EU with a mixed response. When asked whether Brexit would impact their business’ ability to export, more than two fifths (42%) said that it would hinder them versus only 19% who said it would help them. Just over a third (35%) said it would make no difference.

UK SMEs lag behind their developed country counterparts

The report, which will be officially launched at the THINK GLOBAL 2016, also found the UK ranks in the bottom five across European economies when it comes to the share of SMEs among exporters.

Between 2008 and 2015, UK exports grew from $473 billion to $486 billion – an increase of around 3%. If they had grown in line with the global average, they would have been 19% higher or $564 billion in 2014, and had they grown at the rate of Germany, the EU’s leading exporter, UK exports would have been 7% higher or $508 billion.

Mr Quin added: “The fallout from the UK referendum has also brought about a significant amount of uncertainty for businesses but, if anything, it reinforces the importance of taking a global view and exploring new markets.

“As the Government’s Brexit negotiations take centre stage over the next few years, we would urge that SMEs are included and actively consulted throughout the process in order to ensure their views and needs are actively considered.”

The report coincides with a new study by Capital Economics, which found SMEs who export are more optimistic, predicting revenue growth of +1.8% in the next 12 months compared to +1.2% for the 54% that don’t. Exporters also expect job creation of +1.1%, compared to +0.5% for those who don’t.