Small and medium-sized enterprises are a major contributor to the UK economy, representing approximately 5.6 million businesses.
They are important in the growth of the country, especially with regards to exporting. Unfortunately, according to a survey conducted by British Business Bank, only 9% of SMEs are exporting, compared to 44% of German SMEs, a figure reported by Federal Ministry for Economic Affairs and Climate Action. The reason for this difference could be because UK SMEs often face a variety of obstacles when attempting to export goods and services.
What are these obstacles?
Trade barriers are restrictions on international trade imposed by governments. These restrictions include tariffs, import or export quotas, subsidies or other regulations that make it difficult for companies to do business outside their home country.
Trade barriers can have a significant effect on exporting as they can increase the cost of goods and services, making them less competitive in international markets. This can lead to a reduction in the number of foreign markets available to exporters, limiting their potential sales. In addition, trade barriers can create administrative delays that can increase the cost of doing business. These costs are then passed on to consumers, making exported goods and services less attractive.
For SMEs, the impacts of trade barriers are particularly severe as they often lack the resources to navigate the complex and lengthy processes associated with export regulations. Trade barriers can also create legal and financial risks for SMEs, as they may be subject to fines or other penalties if they fail to comply with the regulations.
Despite these challenges, technology has lowered trade barriers for SMEs in several ways. Technology gives SMEs access to customers, suppliers, and partners in different parts of the world, making it easier to reach global markets. Technology has also given SMEs access to e-commerce platforms such as Shopify, and payment platforms like Stripe, which have lowered the barriers for an SME to become an exporter. Technology has also helped SMEs to overcome language and cultural barriers, allowing them to communicate with customers and partners more easily in different parts of the world. So, with technology always advancing, could this mean more SMEs will be able to export in the future?
Outsourcing and drop shipping
Outsourcing or sourcing globally can introduce volatility into supply chains as it involves working with suppliers from other countries, which can be subject to a few changes involving the economy, politics and the competition. These factors can cause prices to fluctuate or delivery times to slow down, making it difficult for SMEs to maintain consistent supply chains.
Despite this, outsourced fulfilment can benefit SMEs with exporting by taking the burden of shipping and logistical tasks away from the company. Instead of having to handle the shipping and handling of orders, the business can outsource this to a fulfilment partner who can take care of it for them. This can save SMEs time, money, and resources so they can focus on other areas of their business. Outsourcing fulfilment can also help SMEs reduce costs associated with international shipping, taxes, and customs fees. Why would a business not want to outsource?
What is the solution?
If SMEs used a combination of outsourcing but also held low levels of inventory, it would enable them to quickly respond to customers’ changing needs. Low levels of inventory would allow SMEs to move quickly to develop and produce new products without having to invest a large amount of money, which would be wasted if the product did not sell. It also allows them to take advantage of their distribution networks, as they would be able to move products easily from one location to another. However, SMEs need access to financing solutions that recognise the short-term nature of changing customer demand and the importance being able to respond quickly to new opportunities.
Exporting SMEs need finance to respond to these challenges and opportunities to grow their business, invest in new technology and equipment, expand their operations, hire new staff, launch new products and services, and take advantage of market opportunities. Access to finance can also help SMEs to manage unexpected delays in payments and stock delivery. This is where Newable can help.
Newable’s Export Finance is a UK Export Finance supported product that gives exporting SMEs flexible working capital to help them capture opportunities and respond quickly to challenges.
We provide working capital finance facilities of up to £300,000 for exporters to help them win contracts, fulfil orders and support growth.