Why export - Risk or Opportunity?
Confused or uncertain about whether to export? Careful planning can unlock great rewards.
EXPORTING CAN DELIVER BENEFITS
EXPORTING CARRIES BUSINESS RISKS
EXPORTING NEEDS CAREFUL PLANNING
Exporting can bring many advantages for businesses
They include:
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Increase sales and improving your bottom line
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Improving your competitiveness against domestic and international competition
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Potential economies of scale
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Diversification of customer markets
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Enhanced Innovation and acquisition of new skills
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Boosting your profile and credibility
If you have maximised the sales potential of your own market or competition is too fierce, exporting may provide an opportunity to sell your product or service in a higher margin market or to simply generate more revenue.
Increased Sales & Profits
Improved Competitiveness
Economies of Scale
Customer Diversification
Innovative Technology
Raised Profile & Credibility
Exporting and importing
Among actively trading companies with a workforce of 10 or more, 19% reported exporting and 24% importing within the past 12 months.
In February 2023, businesses that had engaged in exporting and/or importing during the last year were surveyed about their trade activities compared to February 2022, as well as the challenges they faced, particularly those that had increased since the previous month.
Comparative Trade Activities: The percentage of currently active businesses with at least 10 employees that had participated in exporting or importing within the last year is presented as a comparison to the same month of the previous year. Response categories have been consolidated for ease of presentation.
Trade Challenges: The percentage of currently active businesses with at least 10 employees that reported exporting and/or importing in the last year and described the impact on their trade activities. Companies may indicate that their exporting and/or importing remained unaffected but can still report challenges experienced.
It is important to exercise caution when interpreting these results, as the specific phrasing of the question led to a limited number of businesses responding.
Data points are plotted at the midpoint of each survey wave's period.
Source: ONS Business insights and impact on the UK economy: 6 April 2023
Top 20 UK export markets for goods and services in 2022
Exporting: Services
The UK is a global Services powerhouse. It is often overlooked that, whilst the UK may run a Goods deficit, it runs a healthy trade surplus in Services. In 2021, it exported £303.6bn whilst importing £176.6bn. This compares to £321.8bn and £477.9bn for Goods. Globally, it is the second biggest exporter of Services, behind the US.
The biggest sector is 'Other Business Services' which includes legal, accounting, advertising, research and development, architectural, engineering and other professional and technical services. Other big categories include Financial, Travel, Transportation and Telecommunications and Computer and Information Services.
Globally, according to the WTO, services are the fastest growing sector of the global economy, account for around two-thirds of global output and nearly 20% of global trade. Global trade in services is governed under a set of multilateral rules known as the General Agreement on Trade in Services (GATS).
Exporting services has its own particular requirement. Amongst the differences between exporting goods and services is the difference in tangibility and the level of customer involvement in the purchase process. When selling goods, they can usually be viewed and tested for suitability by the customer before they purchase. When selling a service, the transaction becomes much more about you, your reputation and how effectively you bridge cultural sensibilities to understand and build relationships with foreign customers.
“Yet growth is the key to exporting: exporting SMEs tend to have higher revenues and a longer history than non-exporters. Supporting SMEs to grow therefore appears to be the best way of growing SME exports.”
British Business Bank, February 2020
To export or not?
Exporting can provide great opportunity to expand in to new market where you can develop new customers and increase profits. However, trading internationally presents some extra risks and challenges. You can't eliminate these risks altogether, but you can manage and minimise them.
Perceptions of the difficulty of starting to export are perfectly valid, and it can be daunting to know how to approach the process. In the same way, increasing the number of markets to export to can bring additional concerns. However, there is a huge range of advice to smooth your route to exporting success.
Set off on the road to exporting by choosing your market
What risks are involved when exporting?
Creditworthiness
Different language, business culture and legal system
Country risk
Cashflow
Currency
Regulatory
Intellectual Property
Complexity
UK SME Export Statistics
Longitudinal Small Business Survey: SME employers (businesses with 1-249 employees) – UK, 2021
31 August 2022
Top 4 SME Most Likely Export Sectors
SME Exporters of Goods & Services
“In the past, the UK got away with selling things that weren’t unusual. Now it’s no use trying to export without having something that’s unusual and better.”
Founder, Dyson Ltd
Investment data - inward and outward
How to find new customers
You need to develop a revised marketing plan to take account of local customs, as well as research and explore new routes to market that may include finding local distribution partners and new direct selling channels.
Selling abroad is not something that should be done without the right preparation and research. Whilst getting it right can bring great rewards, getting it wrong can cause considerable disruption to your business and, even worse, your bottom line!
Before heading into the unknown, ensure you have done your homework to give your business the best possible chance of success.
Working out what you know and, more importantly, what you don’t know will allow you to plan accordingly.
See 'Choose a market' to find out more.
Business Planning
Assess what your company wants to gain from exporting:
What impact will exporting have on your domestic business plans and does overseas expansion bring greater benefit than domestic expansion?
Do you have the management, personnel, production capacity and other resources readily available?
Is your product or service compliant with all the rules and regulations applicable in your target market(s)?
Do you need a licence to export your particular product or service?
For a much fuller guide, see How to create an export plan on the great.gov.uk website, set up by the Department for International Trade to provide a wide range of advice and resources to help get more businesses exporting.
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