UK SMEs are outperforming their European counterparts when it comes to building revenue from export - according to a survey commissioned by UPS (NYSE: UPS) of more than 8,000 SME owners or directors across seven countries.
UK SME Exporting Insights surveyed small and medium-sized business owners or directors of SMEs in the UK. This was part of a larger survey of over 8,000 SMEs in seven major European markets (Germany, Italy, the Netherlands, France, Poland, Belgium, and the UK) across the automotive, healthcare, high tech, industrial and retail sectors. The research examined motivations for exporting and identified key barriers and anxieties that SMEs face while selling goods internationally.
UK SMEs that export outside the EU led the European field of the countries surveyed in increasing turnover in the years following the global financial crisis, with 72% reporting increased turnover in the years 2010 to 2012. More generally across the countries surveyed, the research found that SMEs that export increased turnover more often than those that shipped only domestically, with the exception of Italy and Poland.
Despite these successes, the research found that SMEs across Europe are still failing to take advantage of all the export opportunities available - with shipping costs, administrative burdens, and cultural and linguistic barriers hampering international expansion. UK SMEs in particular have an 'island mentality', and concerns over cultural and language barriers are preventing them from exporting more.
"The business climate is competitive, and there are extensive market opportunities beyond the EU," said George Willis, Managing Director, UK, Ireland and the Nordics, UPS. "UK SMEs have to look beyond the island to expand their customer base and grow their businesses."
UK SMEs find Competitive Advantage Outside of EU
According to the research, UK SMEs significantly outperformed their European counterparts in increasing turnover through export. Among the countries surveyed, an average of 43% of exporting SMEs across Europe increased turnover exporting within or outside the EU. UK SMEs were 29% more successful at increasing turnover than the European average when exporting outside the EU, and 26% percent more successful when exporting inside the EU.
While most sales for UK SMEs are within the EU, some are shipping to all continents. Thirty-nine percent of UK SMEs that sent shipments have exported to countries within the EU, and 31% have exported to countries outside the EU. The US is the top destination outside Europe for exporting UK SMEs. Altogether 54% of SMEs that had sent shipments outside the EU had exported to the US. English-speaking destinations such as Australia and Canada also figure high on the list of export destinations outside Europe.
The research found that UK businesses of all sizes are exporting, from the smallest micro businesses with just a few employees to the largest SMEs with nearly 250 employees. So-called medium-sized businesses, with between 50 and 250 employees, have the highest percentage of exporters at 29% compared to their small and micro counterparts. Opportunities for exporting exist for all sectors, though the UK high-tech and industrial industries outperform the national average for exports across all sectors. SMEs in the UK have the highest percentage of online sales outside the EU compared to other European countries surveyed.
The majority of shipments sent by surveyed SMEs are destined for domestic customers and other countries within the EU, and the findings suggest that these businesses need help to explore markets further afield. Concerns over goods being lost or damaged and a lack of information about how to manage export regulations and procedures are curbing the appetite for this export expansion.
"Our research shows that some ambitious SMEs are already taking the first steps toward expanding into international markets. The business rewards of exporting can include increased revenue and robust growth, and by working with the right logistics partners, the risks can be managed," said Willis.
According to the research, Italy, Germany, and France have the largest number of exporting SMEs in the sector survey. SMEs in Belgium, the UK, and the Netherlands are the most advanced exporters in reaching markets beyond the EU, as they are most likely to be shipping more packages outside of the EU compared to the other countries surveyed.
Risk and Regulation: Export Concerns are Top-of-Mind for European SMEs
Between 51 to 81% of SMEs surveyed predict their exporting activity will remain static over the next 12 months. However, SMEs in the UK are bullish compared to other countries, with 46% of UK SMEs reporting anticipated export volume increases over the next 12 months, versus 41% in Germany 31% in Belgium and just 17% in France. Would-be exporters are reticent to begin sending goods abroad, with all major respondents – with the exception of Poland and Italy, where there was some optimism – reporting that they are not very likely or extremely unlikely to start exporting in the near future.
While the research shows that in both the UK and Germany exporting is seen as the "logical next step" to growth, potential risks are top-of-mind. SMEs in all markets say that the risk of goods being lost or damaged is a major barrier to exporting within the EU. Moreover, export regulations, procedures, onerous administrative requirements and costs were ranked the top barriers to exporting to the US. Across the seven markets, micro-sized businesses tend to have the greatest concerns about all exporting risks, suggesting they need a higher level of support compared to their small and medium-sized counterparts.
Many exporters have little knowledge of the TTIP (Transatlantic Trade and Investment Partnership) – a trade agreement being negotiated by the EU and US that could remove tariff barriers and cut customs red tape – and how it could help them expand into the US market. Awareness and understanding of the agreement is low across all markets surveyed, on average 21% or less. Exporters in Germany have the greatest awareness of the TTIP at 47%, compared to 11% in the UK.
About European SME Exporting Insights
The research surveyed 8,144 SME owners or directors, including managing, commercial, business or sales development directors. The surveys took place from 1 to 10 November 2013 and 7 to 9 May 2014. Interviews were conducted in: Belgium (613), France (1,265), Germany (2,281), Italy (613), the Netherlands (604), Poland (400) and the UK (2,368). The sample for this study was drawn by Dun and Bradstreet. Businesses from the automotive (666), healthcare (1,690), high-tech (1,009), industrial (1,949) and retail (2,830) sectors participated. The qualitative research took the form of eight workshops, four in Germany and four in the UK with the purpose of further exploring the barriers to export, the export journey and what help SMEs are looking for regarding exporting.
Survey data has been grouped according the EU definitions of micro, small and medium-sized enterprises, which combine staff headcount and turnover or annual balance-sheet total.
Micro enterprises were defined as employing fewer than 10 persons with an annual turnover and/or annual balance sheet total not exceeding €2 million (£1.6 million). Small enterprises were defined as employing fewer than 50 persons with an annual turnover and/or annual balance sheet total not exceeding €10 million (£8 million). Medium-sized enterprises were defined as employing fewer than 250 persons with an annual turnover not exceeding €50 million (£40 million) or with an annual balance-sheet total not exceeding €43-million (£35 million).