Why export - Risk or Opportunity?

Confused or uncertain about whether to export? Careful planning can unlock great rewards.

EXPORTING CAN DELIVER BENEFITS

Exploring new markets can greatly benefit SMEs

EXPORTING CARRIES BUSINESS RISKS

Careful mitigation of the risks can unlock substantial opportunities

EXPORTING NEEDS CAREFUL PLANNING

Develop a plan to leverage the full advantages of exporting

29% of companies (who don't export) claim they have never had the benefits of exporting explained to them.

Exporting can bring many advantages for businesses

They include:

Increase sales and improving your bottom line
Improving your competitiveness against domestic and international competition
Potential economies of scale
Diversification of customer markets
Enhanced Innovation and acquisition of new skills
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.

UKTI/DIT - Your Export Journey: Things to consider and who can help

Increased Sales & Profits

Selling in to overseas markets can help boost your revenue and profits. You may be able to charge a higher premium or take advantage of using spare capacity to lower your marginal cost of production.

five arrows on a road with one pulling ahead

Improved Competitiveness

Exporting can expose you to new business practices and techniques as well as accelerate the learning curves of you and your team. Selling into new markets can reinvigorate both your business and enhance staff motivation.

chart with line rising and magnifying glass

Economies of Scale

Exporting can produce attractive economies of scale. By targeting overseas markets, you can find more potential customers that help support the scale required to either invest in new capacity or lower production costs.

Customer Diversification

Working with new customers in overseas markets can help protect your business in the event that there are the (inevitable) ups and downs in the business cycle.

Innovative Technology

Working in new overseas markets can introduce you to new techniques and technologies that canboost your productivity and profitability.

Raised Profile & Credibility

Successfully exporting can raise your market profile and give greater confidence to your business partners about your capabilities and strengths.

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

NEW TECHNOLOGY

New technology means it has never been easier to trade around the world. For ambitious SMEs, there are fantastic opportunities to boost your growth and profitability

Your Local Competition

Who are they and what are their strengths and weaknesses?

Find out how to assess your competition

B2B Prospects

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10 key steps to successful exporting infographic

Graphic showing top 20 UK export markets 2021

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.”

UK SME exporting trends: finance and trade
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

Understanding the credit risk of your customer can be more difficult, while at the same time taking legal action to recover unpaid debts might be expensive or even impossible.

Different language, business culture and legal system

These factors can increase the risk of confusion and potential problems. Ensuring a thorough understanding of the market is essential.

Country risk

The country might be economically weak, politically unstable or prone to natural disasters; see our guide to choosing a market.

Cashflow

Goods generally take longer to deliver overseas, adding an extra delay from when you incur costs, such as raw materials, to when the customer receives the goods and pays for them. This can increase your financial burden so it's important to check that you can afford to tie up working capital in exports.

Currency

If you quote or sell in foreign currency, it's a good idea to protect yourself against the risk of changes in the exchange rate.

Regulatory

If you are VAT registered, you must provide details of all your transactions with other European Union (EU) member states on your VAT return. You will need to complete additional monthly Intrastat declarations if your purchases from EU member states total more than £1.5 million of goods and/or your sales to EU member states will reach £250,000 in a year. Obviously, following Brexit there may be changes to the regulatory system so make sure you check with HMRC. VAT is a tax on goods used in the EU. If you are exporting goods outside the EU, you do not charge VAT. The sale becomes zero rated as long as you get and keep evidence of the export. You must also make sure the goods are actually exported and obtain the evidence within 3 months.

Intellectual Property

Companies overseas may try to copy your ideas or abuse your trademarks, and it can be difficult to protect and enforce your rights.

Complexity

Managing international deliveries and payments can be more complex than when trading within the UK. You need to make sure that you have the right skills and resources.

UK SME Export Statistics

Longitudinal Small Business Survey: SME employers (businesses with 1-249 employees) – UK, 2020

Top 4 SME Most Likely Export Sectors

Manufacturing49%

Information & Communication43%

Retail & Wholesale30%

Professional & Scientific29%

SME Exporters of Goods & Services

Wales SME Employers17%

Scotland SME Employers15%

England SME Employers19%

N. Ireland SME Employers31%

Read the report

bizequals digital platform for exporting advice

“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.”

James Dyson
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 in to the unknown , make sure you have done your homework to give your business the best possible chance of success.

Working out what you do 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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