At the British Chamber of Commerce conference held in London on Thursday, UK trade minister Lord Green told the audience and GTR that Britain must start developing its export strategy.
Britain has made a concerted effort over the last two years to develop its foreign direct investment, according to Lord Green.
However, the British government has so far failed to put as much effort into building on its foreign trade relationships.
“The British are good investors, but our problem is that we don’t turn these opportunities into relationships that produce ‘good’ trade, and this is something we need to work on.”
“We’re good at investing in other countries, and sometimes we do bring local suppliers into that overseas business, but we don’t invest in our own export platform. Germany scores very highly because it does this,” he said.
The government is encouraging UK firms to bid for railway and airport contracts in Malaysia, Oman, China and Hong Kong; oil and gas projects in Kazakhstan and Australia, hospital projects in Saudi Arabia, Kuwait or South Africa, and to compete for global sporting contracts in Brazil, Qatar and Russia.
To give UK exporters the extra push, and to eliminate a lot of the financial difficulties they encounter when trying to export their goods, the government is about to roll out a new incentive. The scheme will allocate export vouchers to selected businesses for them to decide on their best mode of investment.
“We’re giving local businesses who are applying for government loans the freedom to use it in an investment of their choice – as we see it the people who best know what businesses want are the businesses themselves,” Lord Green added.
More details on the scheme, which will be implemented later this year, are expected to be announced shortly.
This export scheme is sorely needed according to British corporates speaking at the conference. Ewan Lloyd-Baker ,CEO of engineering company Hayward Tyler, urged UK SMEs to try and create strong relationships with banks to better access funding. He said that the last few years have been particularly challenging for his firm, and that its progress has been “despite of the banks, and not because of them”.
“On a positive note we’re now tapping into the ECGD (UK Export Finance) – although this is something you can only access with a supportive back behind you. We’ve now taken a massive step forward through our determination to access finance from where we where two years ago, but I’m afraid to say that for a lot of these governments incentives it’s too little too late.
But I think that government export schemes are taking themselves more seriously now.”
Simon Nicholson, head of international and trade at Barclays believes that a lot of the financing barriers that UK SMEs face actually stem from their lack of preparation in applying for export funding, and that local businesses need to “get their houses in order” before even approaching the banks.
In fact, he stated that the main reason that SMEs encounter so many financial hurdles is because they approach the banks after they’ve taken their export order, or after the order has been shipped.
“First of all we need to know what it’s going to cost, the business itself has to mitigate its cash flows and provide a certainty of payment from its customer. They also need to come to us with a full understanding of their foreign exchange payment risks.”
He believes that it’s only when SMEs come fully prepared that these financial challenges will improve.
According to Nicholson, a recent survey that Barclays conducted showed that only 2% of UK SMEs are experiencing funding issues.
“I think we’re hearing a lot of noise from this 2%, but I don’t think this is as big an issue as everyone is making out,” he claimed.