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Local SMEs lead way in revenue growth: UK Export Finance

Research by Censuswide for UK Export Finance (UKEF), the UK’s export credit agency, shows that Northern Irish SMEs are growing at a rate that exceeds their SME counterparts in Scotland and Wales. However, more can be done to increase SME growth in Northern Ireland by maximising export potential.

  • SMEs based in Northern Ireland are growing at a rate of 17% each year.[1] This exceeds the Scottish average of 13% and the Welsh average of 15%.[2]
  • SMEs that export outperform those that do not. Across the UK, SMEs with purely domestic customers reported annual growth of 8.4% over the last five years, whereas this increased to as much as 15.2% for those that export.[3]
  • 28% of Northern Irish SMEs state that concerns about the risk of not being paid by a foreign buyer limits the extent to which their business exports internationally.[4]

With growing demand from overseas for goods and services from the United Kingdom, Northern Irish companies should be capitalising on the opportunity to export. This is particularly the case with small to medium enterprises (SMEs) – the research shows that those which export outperform those which do not.

Across the UK, SMEs with purely domestic customers reported annual growth of 8.4% over the last five years whereas this increased to as much as 15.2% for those which export. Furthermore, 42% of SMEs say that exporting has increased profits by up to 20% and almost one in ten (9%) say it has increased profits by over 20%.[5]

Yet the research has also confirmed that UK SMEs are not fulfilling their export potential, due to a number of barriers. It is now estimated that 19% of SMEs nationwide believe they could export but do not.[6] 60% of potential exporters cite access to finance as a key factor in their export plans.[7]

Late payments are the most critical issue nationwide, with 63% across the UK citing it as a barrier to entry. Whilst 52% of payments are made at the point of supply, 45% of sales happen on credit. This means that at any one time SMEs are owed an average of £64,000 in late payments, with 11% owed between £100,000 and £250,000. The consequences of this can result in damaging ripple effects that have a greater impact on SMEs compared with larger businesses.[8]

In Northern Ireland, specific financial barriers to export include concerns about cash flow or lack of working capital (cited by 22%), the length of time it takes to be paid (28%), the risk of not being paid by a foreign buyer (28%) and a lack of information about foreign markets (18%).[9]

UKEF helps companies of all sizes overcome these issues.  Last year alone, it supported over 250 businesses. From offering attractive financing terms to help businesses win contracts, to providing insurance to safeguard against financial risks, UKEF helps companies from all sectors to maximise the opportunities available in an international market.

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 more 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.”

Appetite for export finance

When considering export, 85% of Northern Irish SMEs state that they would find a service that lends capital to international exporters while they await payment, and insures them if their customers do not pay, to be useful or very useful.[10] For the proportion of SMEs that are refused support due to their lack of export experience, UKEF’s financial services can be invaluable.

UK saturation results in higher growth outside the EU

A recent study by the Centre for Economics and Business Research (CEBR) states that 13% of SMEs across the UK have turned to exporting due to saturation in their own markets which highlights the importance of international trade opportunities. Despite this, there is growing interest in markets outside Europe with survey data collected since 2010 showing that UK SME’s are exporting to Canada, South Africa, US and China at a faster rate than anywhere else in the world.[11]

Interestingly, research gathered by Capital Economics indicates that SMEs grow slightly faster if they are focused on markets outside the EU.  SMEs that get more than a quarter of their revenue from non-EU exports are reporting growth of 12.9% per annum, compared to growth of 12.2% for those that focus on customers within the EU.[12]

The export potential

Since 2000, the number of UK small businesses has grown by 25% whereas in comparison, the number of large businesses (more than 250 employees) has grown by just 4%.[13]

By addressing some of the barriers that SMEs face around finance, the UK could increase its export levels, and in turn, economic growth. The overall ambition for the government is to raise exports as a percentage of GDP from 30% to 35%.

  • [1] Censuswide survey of 116 SMEs in NI conducted in June and July 2019
  • [2] Censuswide survey of 566 SMEs (116 in NI, 250 in Scotland, 200 in Wales) conducted in June and July 2019
  • [3] Capital Economics’ analysis of YouGov survey of 1,034 SMEs conducted in February 2019
  • [4] Censuswide survey of 116 SMEs in NI conducted in June and July 2019
  • [5] CEBR, Thinking Global: The Route to UK Exporting Success (2016)
  • [6] DIT National Survey of Registered Businesses’ Exporting Behaviours, Attitudes and Needs 2018, Wave 4 Report 
  • [7] Civitas Helping SMEs Access Finance: The importance of responsible finance providers, 2017
  • [8] All late payment statistics from Urica, Overcoming financial barriers to exporting, 2017
  • [9] Censuswide survey of 116 SMEs in NI conducted in June and July 2019
  • [10] Censuswide survey of 116 SMEs in NI conducted in June and July 2019
  • [11] Office for National Statistics’ Longitudinal Small Business Survey 2017 and Federation of Small Businesses, Destination Export (2016)
  • [12] Capital Economics’ analysis of YouGov survey of 1,034 SMEs conducted in February 2019. Note ‘EU focused’ (Non-EU focused) defined as firms with more than 25% of revenues from exports and a higher (lower) share from EU markets
  • [13] Department for Business, Energy and Industrial Strategy (BEIS). Note: “Non-employing” comprises sole proprietorships and partnerships with only a self-employed owner-manager(s) and companies with one employee, assumed to be an employee director.