Small Business Growth 'Is Being Powered By Domestic Trade'

SMEs Still Concerned About The State Of The Global Economy

23.04.2014

Steven Beahan, Partner | +44 (0)114 294 7868

Small and medium enterprises (SMEs) in the UK have been heavily reliant on an upturn in consumer demand on the domestic front.

This is according to the latest quarterly International Trade Monitor from Western Union Business Solutions, which showed many firms are still finding it hard to export due to concerns about the global economy, the Daily Telegraph reports.

Although the study suggested that 40 per cent of small firms expect trade with Europe to recover over the next 12 months, there is still a reluctance for businesses to explore other potentially lucrative markets.

Christina Hamilton, managing director of Western Union Business Solutions, told the news provider that while the recent improvement in domestic trade has been important, there is a danger that the economic recovery will become "unbalanced" if firms cannot sell goods overseas.

"The risk is that businesses will return to old habits and rely too much on local customers at the expense of exporting to high-growth markets," she was quoted as saying.

"Not only does sterling strength hurt the international competitiveness of UK SMEs, but continued pound appreciation also has the potential to derail hopes of a more export-led recovery."

The UK government has been encouraging SMEs to break into new markets over the past few months, with trade missions being launched in China and Russia, among other places.

However, the Western Union Business Solutions report showed that British companies are actually reducing the amount of trade being conducted in emerging markets. Just nine per cent of small firms currently have customers in China - down from 15 per cent in the first quarter of 2013.

Meanwhile, a mere three per cent export to Brazil, which is widely predicted to become an extremely lucrative trading hub for the UK in the coming years, and a paltry six per cent sell goods and services in India - a nine per cent drop on last year.

Expert Opinion
This research has provided a fascinating spotlight into how small businesses are viewing both their domestic interests and the opportunities which are available in overseas markets.

"Perhaps one of the most interesting aspects is how smaller firms are currently cautious about looking further afield at this time, but it is likely that such attitudes will change as the economy improves and more potential avenues into foreign markets emerge.

"It is vital that SMEs recognise the huge benefits of having a balance of both domestic and overseas interests, as well as the advantages of potentially lucrative steps into countries such as Brazil and India. In the 21st century, it is often the case that having a local focus is simply not enough for businesses to enjoy growth and reach their potential.

"We would urge small businesses to consider their future and also seek legal advice to ensure they are prepared to take advantage of all of the opportunities which are coming their way."
Steven Beahan, Partner