Despite expectations that the pound will remain weak against the US dollar and Euro for the foreseeable future, small and medium-sized enterprises in the manufacturing sector are failing to take advantage of the current favourable export environment, according to a study by GE Capital.
One in five (20%) of SMEs in the manufacturing put overseas expansion in their top business priorities for the year and just under one in five (19%) said that they expect their growth to come from international sales over the next three years, thus making them heavily reliant on the fortunes of the UK economy. This is marginally more than in 2008, when 19% said overseas expansion was a priority, and 17% were planning on growing non-domestic sales.
The findings, which are based on interviews with the owners and mangers of 500 UK SMEs, show that the UK government's emphasis on an upturn that will be largely export-driven may be at odds with the expectations of small and medium sized enterprises in the manufacturing sector.
Of those companies that do export, almost three-fifths (56%) continue to invoice their overseas customers in sterling rather in the foreign currency of their buyer. This is no change since 2008 when only 56% were doing so. As a result, these businesses could miss the opportunity to either increase volumes or indeed take advantage of the weak pound through higher profit margins.
John Jenkins, CEO, GE Capital: "Now that the long-awaited export-led recovery shows signs of at last arriving, the weakness of sterling against the Euro and the US dollar should provide excellent opportunities for UK firms to maximise their export potential. However, our study shows that fewer small and medium sized businesses are making the most of the export opportunities than two years ago, despite an incredibly favourable environment. Nonetheless, those that are planning to venture into overseas territories for the first time should seek professional advice on securing payment and managing exchange risk."
Whilst overseas expansion is of low priority overall, the research highlights that there is variation from region to region. Firms in the West Midlands (16%) East Anglia (12%) and the South East (12%), are most likely to consider expanding overseas as one of their top priorities, while owners of firms in the North and Scotland are the least likely (4% respectively). The main priority for most businesses continues to be domestic sales, motivating staff and taking additional costs out.
Similarly, there are variations across industry sectors. Owners of manufacturing firms (20%) are most likely to see overseas expansion as one of their business focus areas, followed closely by owners of media and printing firms (18%). Owners of healthcare and IT & telecoms firms are least likely to consider overseas expansion (0% respectively).
GE Capital commissioned an independent market research company, the Survey Shop, to interview 500 owner managers of SMEs based in the UK. The research was conducted anonymously by phone during March 2010.
About GE Capital in the UK / EMEA
GE Capital is a commercial finance provider in the UK with major operations in asset-based, fleet, leasing and healthcare financial services. GE Capital has major offices in Bristol, Manchester, Sale and the London area and focuses on providing leasing and lending solutions, from working capital and investment finance through to fleet management and equipment leasing to mid-market customers. GE Capital is also a provider of specialist finance throughout the EMEA region, providing a wide range of solutions including: accounts receivable management, inventory finance, ABL, cross-border financing, leveraged finance, European leasing/vendor finance and fleet management. GE Capital focuses on sectors where it can share GE's 130+ year heritage with customers - energy, healthcare, media, transportation and industrial - and has a major footprint in EMEA, including an exciting $8 billion commercial finance joint venture with Mubadala in Abu Dhabi.
About GE Capital globally
GE Capital, headquartered in Norwalk, CT, is a global provider of financial products and services to businesses, retailers and consumers. It finished 2008 with net income of $8.6 billion and total assets in excess of $572 billion.
GE is Imagination at Work -- a diversified technology, media and financial services company focused on solving some of the world's toughest problems. With products and services ranging from aircraft engines, power generation, water processing and security technology to medical imaging, business and consumer financing and media content, GE serves customers in more than 100 countries and employs more than 300,000 people worldwide.