According to the International Trade Survey, commissioned by the Institute of Exports (IOE) and conducted by UK consultancy Trade Export Finance, 66% of the 1,800 UK companies that took part had to use their own finances to fund exports, due to lack of support from banks. The survey adds that SMEs with turnovers below £5mn are the hardest hit when seeking trade financing.

It also points to a lack of awareness of government support schemes, such as the country’s export credit agency UK Export Finance, among small businesses, with only 10% of companies with a turnover above £1mn receiving this type of support.

Speaking at the UK Trade and Investment’s Aim for Africa conference this week, UK Export Finance chief executive Patrick Crawford explained that the ECA only started catering for SMEs in 2011, and that raising awareness in this sector has been difficult. “We’ve had quite a lot of interest, but we have not yet supported as much business as we would have hoped and as we would expect. The large exporters know where to find us and have ready access to our support, as we’ve been there for them over the last 20 years. The challenge for us is to promote a similar degree of awareness in the vast and greater volume of British exporters who have not been using us and for whom we haven’t been relevant,” he tells GTR.

To that end, the ECA is appointing export finance advisers affiliated with UK Trade and Investment in each of the nine English regions, as well as in Wales, Scotland and Northern Ireland to network with exporters, banks, law firms, and chambers of commerce.

At the launch of the survey on June 13 in London, Trade and Export Finance managing director Mark Runiewicz added that only 42% of UK exporters are aware of government support scheme, and said his company and the IOE should take the lead in promoting them. “The banks are doing it, but as a consultancy, we’re there to tell businesses about these schemes. What we don’t want to do is pigeon-hole everybody. We need to be looking at what the needs are, what is available from the banks, and how can we tie them together to fit on a case-by-case basis,” he said.

Simon Davies, global finance director at independent invoice finance provider Bibby Financial Services, tells GTR: “Banks are tied up by regulations such as Basel II, Basel III, and Basel IV when it comes in due course. Basel III is going to put restrictions on trade finance in terms of regulatory oversight, and therefore increase costs [for banks]. Ultimately, when it comes to their capital allocations and the returns that they provide, it becomes increasingly difficult for them to support smaller businesses.”

At the launch of the survey on June 13 in London, bank representatives pointed out that exporters are under the false perception that trade finance is expensive, when in reality most of the costs are paid after the transaction. However, they also said that returns in equity for UK banks are the lowest in the world at around 4%, compared to 26% for Indonesia for example, meaning that banking prices are bound to increase.

Despite issues in accessing trade finance, the survey reveals that 72% of UK exporters expect an increased turnover based on overseas sales in 2012. Moreover, 56% of respondents said exports represent over half of their turnover.

One of the new markets where UK exporters are encouraged to do business is Africa, which Runiewcz says is full of “untapped opportunities”.

At the UK Trade and Investment (UKTI) Aim for Africa conference, panellists urged businesses to use the UK’s close ties with the continent to expand their exports, but warned that knowledge of the African market is essential.

HSBC managing director of Sub-Saharan Africa and Europe project and export finance Richard Hodder tells GTR: “UK companies need to get out there, go and see what the opportunities are in Africa. There are UK companies there doing extremely good work, landing contracts in these markets, but the reason why they’re doing that is because they’re on the ground they’ve travelled, and made the effort to see potential buyers of their equipment.

“We follow that methodology in our business, we travel constantly to these markets, as it’s the only way that you can win and secure the business in Sub-Saharan Africa.”

UKTI representatives mentioned various cultural obstacles that UK exporters need to overcome when doing business in Africa, including language barriers and red tape, and encouraged companies to seek government support and advice.
Crawford explains that the UK Export Finance is keen to guarantee more deals in Africa after around 20 years of low exposure to the continent.

“With the growth rates that African economies are going to have in the future, building on the growth rates that some of the economies have already had in the last 10 years, we expect that there will be more demand for support from small exporters, and that we will be asked to support large projects in the natural resources sectors as we have been doing in other parts of the world, such as the Middle East and Latin America. We would expect in the years to come that we will have more demand for our support across the board and we certainly have the risk appetite and capacity to respond to that,” he tells GTR.

He expects most of the demand to come from the natural resources and oil and gas sectors, but says construction companies are also returning to undertake civil engineering and building projects in Sub-Saharan Africa, “which we have not seen for some time”.

UK Export Finance is also supporting the aviation sector, particularly African campaigns by Airbus and Rolls Royce. HSBC also mentions aircraft and airport projects, but expects increased demand in the health care industry, with several hospital deals in the pipeline.