GTR and the British Exporters Association (BExA) gathered a handful of young UK-based exporters and export financiers to discuss their biggest achievements and hurdles, and debunk the myths around exporting.
- Geoffrey de Mowbray, co-chairman of the British Exporters Association (BExA) and CEO of Dints International
- Patricia del Valle Perez, vice-president, export and agency finance UK, Santander
- George Hunter, director of sales, Coltraco Ultrasonics
- María Navedo, export and agency finance UK, Santander
- Shannon Manders, editorial director, GTR (chair)
GTR: What has been the highlight of your career thus far as a young exporter or export financier?
Hunter: I have enjoyed working in Japan and South Korea. Japan was somewhere where we had nothing going on and no real business of any consequence. It was one of the most foreign markets. It was completely impenetrable if you didn’t know anybody. Somehow, over the past five or six years, we’ve managed to put in place this quite complicated network of distributors and customers. We now have Japanese approval for their national disaster agency. We are the only UK company I know of who have pulled that off, and now it is quite a busy market for us. Exporting is dealing with the cultural nuances of the country that you are dealing with, and they don’t get more nuanced than Japan.
De Mowbray: This goes across a lot of deals – taking an indigenous business which has zero experience of international finance and getting the deals bankable to enable clients to buy your products. Often the key challenge is getting clients comfortable with the level of transparency which is required. It is the most rewarding, but equally it is a game of patience.
On a similar but different topic, it is great being able to be a small business which is agile, and take on really major competitors. If you are dealing with a client like Codelco, which is the largest copper miner in the world, and you are competing against multinationals, but as a small business your agility and innovation wins you a deal over them, that is really exciting and brings a lot of satisfaction and makes all of the hard work worthwhile.
Del Valle: I’ve been doing export finance for two years, and I’ve done trade finance for 10. I spent most of my career in Hong Kong, so the biggest achievement was to break through in a market that for the bank was so small. Santander was unknown to all the big corporations out there. In a team of five, we managed to have a decent pipeline and decent P&L. It was not one single achievement; it was over the course of five years, going from nothing to something through resilience and passion.
Navedo: Being new to export finance, I’m starting to really see how the banking industry and companies can contribute to progress and development in some countries. I didn’t know that there were projects out there with such a big reach that are changing people’s lives.
GTR: What have been your greatest exporting barriers?
Hunter: A constant niggle is when you get countries that are really difficult to get kit in and out of. A lot of our stuff is hardware, so we need to send physical things across borders. Certainly South America is a classic. Getting stuff in and out of Brazil causes so many headaches, and it costs our customers so much money. Tariff laws constantly cause issues.
Also, finding your customers is always the key. That is probably the biggest challenge: actually understanding how each of these markets work and getting to all of the customers, and that just takes time and effort.
De Mowbray: Market entry is a challenge and we tackle that by spending a huge amount of time in country, adapting to culture, developing relationships, but it is a long play. Although there are exceptions, it is generally a minimum of six months to getting yourself to a point where you can do decent deals with people, and that is six months of being very present; not just going once in six months.
Some of the barriers to exporting still remain financial. I know a lot of the banks are doing work on this, as is UK Export Finance (UKEF). But if you take some of the UKEF schemes out there, they’ve got very little uptake because they’re tricky to deal with. You really need to be an expert in export finance to understand how to use them. A lot of people don’t think about this before they sign their contracts, so only after they’ve signed do they realise that they need to be able to finance them, and that becomes embarrassing for the exporter.
Not only for us as individual companies but for the country, this isn’t great reputationally. If the UK is seen as a country that is very tricky to do business with, people will go elsewhere. So, it’s something, without compromising our values, that we do need to streamline, make better and simpler. Although I understand for the banks it’s a challenge, we need to be able to do those smaller transactions and get them done in a way which
is boilerplate and easy for a client to do.
GTR: What challenges do you see in terms of access to finance?
Hunter: Typically speaking, our transaction values are not enough to interest someone like Patricia. They are maybe not of a scale where our average transaction cost is worth the extra paperwork, frankly. Thankfully, most of the time, we work with customers where we don’t have to do it. If there is a way of making it accessible for, say, £10,000 or £20,000 deals with a more seamless approach, then I think you’d be away.
Del Valle: The financial piece is important. A product as sophisticated as export finance, where it might be a government-to-government transaction, takes a lot of time to put together. The exporters might not have the knowledge to do the transaction. We have to provide that support to those exporters, otherwise they might not have access to those transactions. We take as much time as we can to teach them; we go to the meetings and tell them all about export finance – together with UKEF. There’s also a location issue, because in London, that might be easily accessed, but if you go to other regions in the UK, I don’t think the access is as easy. This is where there is really an opportunity for the banks in the UK to fill.
Hunter: If the government was going to shoulder more of the background risk, would that help to streamline the application process?
Del Valle: I wouldn’t say it’s about risk; it’s about the process for a bank to do an export finance transaction. If you do a letter of credit, it can take one day. It’s quite quick. And then you monetise that more quickly. An export finance transaction, if you are talking about a ministry of finance in Africa, for example, with an exporter in the UK, there are long negotiations until you materialise the contract, and there is a lot of monitoring to do. It is not only getting the loan agreement signed. Afterwards, you have a 10-year loan that you have to monitor. If you are doing a US$500mn deal, the economics makes sense for that time, but for a smaller transaction it’s going to take the same effort and time and obviously the economics are going to be smaller. It doesn’t mean it is not the right deal or it’s not attractive for us; it means that we have constraints. The industry knows there is a gap; it is a matter for each of us to pick it up.
GTR: To what extent has the UK government increased its support for British exporters, and
what more needs to be done?
De Mowbray: UKEF has been putting some great energy into aligning its support with exporters’ needs. I still don’t think everything is quite aligned yet; they are getting there and BExA is working hard to support this. Working with non-bank lenders will change things dramatically – there are challenges with this but nothing that can’t be overcome. It is encouraging to see banks working with alternatively financiers more and more; the banks are not interested in the really small transactions whereas a lot of the other lenders are.
In terms of the UK department for international trade (DIT), I am not entirely sure they have got themselves together yet. Particularly the smaller exporters just need basic things like financial support to go abroad. That lack of financial support is a challenge. It is also very hard to ask the government to put in a big pot of cash to do this. Perhaps the government could work with the venture capital funds to develop funding for companies
to expand internationally.
Del Valle: Involving the young generation is key, because they are ultimately going to be in charge of the business, and they are open to new ways of doing things.
GTR: What are your Brexit concerns, if any?
Hunter: Naturally, if the borders were to go up and nothing flows in and out between Europe and the UK, of course it would be a nightmare. There are certain members of our organisation keeping very close tabs on it. My approach at the moment is that there are too many variables, so soon as I’m given the rulebook I will happily play by it, and until then, we will see.
De Mowbray: We are going through a process and wherever we end up, there will be positives. My biggest concern is that we as a country won’t embrace the opportunity to increase our exports as a result, because one thing that Brexit has driven is more and more focus on international trade. We have four trade ministers now instead of one, and we need to make sure we capitalise on that.
The second one, which is not really for us but for a lot of smaller exporters, is that at the moment, our currency is in a perfect spot to be exporting. What I’m gravely concerned about is that a lot of smaller companies are winning contracts based on exchange rates today, and if they go up, they will become unsustainable. This can be mitigated by tender to export FX cover, which BExA is working on with UKEF to become one of their products.
GTR: What needs to be done to drive the UK’s potential as an exporting hub?
De Mowbray: We need to focus on what we are world leaders in, which is innovation, compliance and anti-bribery, and find a way to make it easy for customers to work with this. We need to focus on not only being a physical hub but being a more digital hub, like we are for finance, but also for international trade. Simply getting everything to work together will enable us to be a conduit for trade outside of what we physically handle.
Hunter: My perspective is much more on the actual building stuff aspect, which is not particularly fashionable here anymore. Some of the scientific expertise, especially in the universities here, is so good. If you are making things where you can have that level of excellence at the heart of everything you are doing, you can compete with anybody in the world.
Del Valle: Education is a big piece, because if you don’t have the knowledge to export or to go abroad, you are less likely to succeed. It starts with the young generation. I don’t think we are preparing young minds to be exporters and to be proactive and create their own companies and be willing to take a chance and go abroad with the right knowledge.
Hunter: I never subscribe to the view that you can’t do it just as cheaply here in the UK. You’ve just got to be clever about it. It can be done. You’ve just got to be smart.
Navedo: At university, they teach us how to think; at work, they teach us what to do. And there is very little space for creativity. I guess more senior colleagues should listen to the voice of thinking, and at university they should give you the tools to put in place, but not teach you how to think.
GTR: What are you doing to attract young people to exporting and export finance?
Del Valle: We have created an informal platform for the young trading community where we can all gather together, and provide networking events, learning sessions, and also go into universities and business schools and talk about export finance as a career option. We currently have 80 members in the platform, and membership is free.
GTR: How is BExA recognising young people within exporting?
De Mowbray: The Young Exporter of the Year Award is the main way that we recognise young exporters’ achievements. What is really exciting is that there are more and more applicants, which just shows that it is alive and well, because I think export in the UK has been a sort of dusty sideshow for a long time.