Finance affecting SMEs and their export potential

According to the UK’s export credit agency, Capital Economics for UK Export Finance (UKEF), 60 per cent of companies have cited finance as a key obstacle to exporting.

As overseas demand for British goods and services increases, UK companies should be capitalising on the opportunity to export, but instead, small to medium-sized enterprises (SMEs) are being restricted because of lack of finance.

YouGov surveyed more than 1,000 UK SMEs for UKEF and found that businesses with purely domestic customers reported annual growth of 8.4 per cent over the last five years, whereas this increased to as much as 15.2 per cent for export firms.

Also, 42 per cent of SMEs found that exporting had increased profits by up to 20 per cent and almost one in 10 (nine per cent) say it has increased profits by over 20 per cent.

However, figures revealed that 19 per cent of small business owners believe they could export but do not, a key factor being that 60 per cent of potential exporters do not have access to finance.

Late payments are the most critical issue with 63 per cent highlighting it as a barrier to entry. Whilst 52 per cent of payments are made at the point of supply, 45 per cent of sales happen on credit.

On average SMEs are owed £64,000 in late payments, with 11 per cent owed between £100,000 and £250,000. Additional cited challenges resulting from late payments include cash flow issues (35 per cent), delayed supplier payments (29 per cent) and reduced profit performance (24 per cent).

Other key challenges to potential SME exporters included difficulty managing exporting procedures and paperwork, the length of time it takes to get paid by foreign buyers and the risk of not being paid at all.

Secretary of State for International Trade, Rt Hon. Liz Truss MP, said: “Finance is a key barrier coming between SMEs and their export potential. If small businesses were to export more, Britain would see even stronger economic growth.

“In its centenary year, UKEF continues to enable companies from across the UK to expand their global reach by helping them succeed abroad. That’s why it is at the heart of my plan to get businesses ready to trade as we leave the EU.”

Louis Taylor, CEO of UK Export Finance, said: “The right finance and insurance can make all the difference for a company that is looking to sell overseas. There’s a wide range of specialist support on offer from both private sector providers and from UK Export Finance working with private sector providers, and we’re here to help UK companies access that support and realise their global ambitions.”

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