UK businesses are largely optimistic about growth prospects over the medium term, with business confidence higher now than this time last year, according to new data from Santander.

The fourth annual Santander Trade Barometer, released today, finds that as many as 60% of the companies surveyed are confident that they will see growth in the next three years.

Businesses aspiring to internationalise are especially optimistic, with the number of domestic-only companies considering international expansion in the next three years rising to its highest level (17%) since the barometer began in 2017.

More predictably perhaps, the findings also lift the lid on some of the struggles that companies are having to contend with as a result of the current economic environment: 35% of companies reveal that business performance has deteriorated over the past financial year, with 89% reporting that this deterioration is due to the impact of Covid-19 on activity. Fully 41% expect a lack of customer demand to impact them, and 32% believe they will  experience supply chain disruption in the next 12 months. Meanwhile, over two-fifths are planning to stop or pause hiring in the UK, with almost a third stopping their UK investment plans as a direct result of Covid-19.

In response to the pandemic, businesses are planning to adapt their operations by varying their products (24%), introducing new partners and suppliers (21%) or looking to expand into new sectors (18%).

Despite falling to third place in terms of negative impact, behind Covid-19 and a UK economic slowdown, Brexit is still a worry for 55% of businesses.

The fieldwork for the barometer was carried out in August, surveying 1,013 UK businesses with a minimum £1mn annual turnover.

Speaking exclusively to GTR, John Carroll, head of international and transactional banking at Santander UK, explains why he believes business confidence is higher now than it was last year; how initiatives like the Trade Club Alliance are becoming increasingly important to connect trading partners during the ongoing pandemic; and discusses the factors that the barometer identify to be crucial to UK companies considering international expansion.


GTR: What do you find to be the most surprising results to come out of this year’s Santander Trade Barometer?

Carroll: To begin with, what isn’t surprising is the huge negative impact that Covid-19 has had, with 71% of businesses expecting the pandemic to have a negative impact on business activity over the next 12 months.

On the other hand, the biggest surprise is the potential for growth that companies are seeing over the next three years. But it’s surprising up to a point: the barometer is not a survey of the overall economy; it is deliberately weighted towards those SMEs and corporates who trade, 70% of which already trade abroad. These are companies that have lived through quite a few crises before: they tend to be resilient, and know how to grow out of a crisis. That’s why it’s so important to understand their needs, which is what the barometer is all about.


GTR: With all the turmoil the industry has faced over the last few months, and all the grim forecasts, why do you think that business confidence is higher now than this time last year?

Carroll: We should not confuse confidence with a lack of awareness of obstacles. I always say that SMEs that trade internationally are the Olympic athletes of any economy: they’re not just competing locally, but also with companies from across the rest of the world. They’re very aware of the obstacles: Covid-19 being number one, according to the Barometer, followed by a UK economic slowdown and the global economic climate, and Brexit. These companies believe they have the products and services to still be able to grow over the next three years. These are the companies that we really need to help and understand to be able to ensure that growth does materialise.


GTR: Coriolis Technologies, which compiles GTR’s data-led Trade Briefings, expects Europe’s trade with the world to fall by around 16.5% during the course of 2020. What does this fall in trade mean for Santander’s trade business?

Carroll: Our Trade Barometer is not a macroeconomic overview, but rather a survey of clients: we look at the end-to-end journey of an SME and corporate and how they trade internationally. It includes trade finance, but that’s just part of the picture. We have developed the barometer to understand what these companies need, not what banks want them to need. The survey tells us that nearly three out of five of these companies believe they will see growth over the next three years. In a fairly difficult environment, as a bank, this is where you want to be playing. Moreover, 26% of companies think that international trade will become more important post-pandemic versus 5% who say that it will be less important.


GTR: What will UK exporters need their banks – and their government – to do to support them, particularly those considering international expansion?

Carroll: There are five key areas which survey respondents have told us consistently are crucial to them. The first is they want access to buyers and sellers; they want trusted connections to buy from and sell to. They also want to be able to diversify their supply chains post-Covid. Secondly, the biggest obstacle by some margin is overcoming bureaucracy, and that is only going to become more problematic as we move into a period of new trade agreements. The third issue is logistics: the cost of logistics and getting access to specialist logistics providers for various sectors. The fourth issue is banking, but not necessarily pure finance. This often includes new e-commerce solutions, for example, as companies look for ways to capture online sales. Finally, for a percentage of companies, there is some difficulty in setting up overseas, and lining up local banking, accountants, lawyers and the like. Those are the five key areas. There is a mix of what should be required from a bank, and what should be required from a government agency.

From our perspective, what are we doing as a bank? With regards to the first area, trusted connections, we have the Trade Club Alliance. In terms of bureaucracy, later this year we will be launching a bespoke overcoming bureaucracy programme, which will link companies to insight specific to their sectors, but also to the provision of services provided by ourselves and by third parties to overcome that bureaucracy – this is going to become even more relevant as we move into Brexit. With regards to logistics, we are rolling out a logistics platform, which will assist companies in improving their logistics when trading globally, and also provide them with more cost-effective options in terms of logistics companies. In terms of banking, the fourth issue, we have launched a whole bunch of e-commerce solutions to train companies about how they should look to trade in this new environment. We are also a very active member of the UK government’s General Export Facility, which will soon be officially launched. Finally, in terms of setting up overseas, we are offering things like the ability to open virtual accounts via our alliance network, and we also have a whole network of accountants and lawyers linked into local government agencies.

In terms of what the government can do, responses to the Trade Barometer indicate that 29% of companies are interested in tax breaks, 29% would like help with reducing regulatory requirements and bureaucracy overseas, and 29% are interested in free trade deals, aimed to help traders in their particular sector.


GTR: Away from the Trade Barometer, what progress has been made on the Trade Club Alliance, and what impact has the pandemic had on that? 

Carroll: The Trade Club Alliance has become a more important resource because of its ability to connect trading partners, especially considering that international trade – as the Trade Barometer tells us – is going to become even more important for companies. According to the Barometer, businesses’ biggest concerns for trading internationally, behind bureaucracy, are the need to find local partners and market access – which the Alliance can facilitate – as well as the missed opportunities due to cancellations of international conferences and events.

To address this, in November we will be launching the first trial online convention, powered by the Trade Club Alliance, focused on the food and drink sector. It will be attended by 200 companies that we have researched and vetted. We plan to do 30 or 40 of these sector-focused conventions, and we think this is going to be a key element to doing business next year.

In terms of new additions to the alliance, we hope to announce a Chinese bank by the end of the year.