Tech exports from the UK could be set to grow 35% over the next five years according to a new report, worth over £8 billion.
According to Tech Nation’s report Unlocking Global Tech which looked to asses the value of UK digital tech exports and opportunities for the future, UK exports are booming with the trade surplus rising by almost 70% since 2015.
The government-backed trade association highlighted international markets such as the US, Canada, The Netherlands, Canada and Germany as highly attractive export markets for tech firms, whilst Singapore and Brazil are high-growth global opportunities.
Already the 5th largest digital tech service exporter in the world (surpassed by only India, the US, China and Germany), the potential for high growth by 2025 lies partly in the number of rapidly-growing UK-based tech firms – many of which are yet to reach their full international potential.
Gerard Grech, chief executive of Tech Nation said of the report that: “The UK is a natural home for many scaling tech businesses, and there are a proportionally high number of scaling tech businesses located here that are already well-established in delivering domestic tech services.
“The UK is also third in the world for the number of UK tech unicorns, and number one in Europe. These factors give us a strong conviction that UK founders, government and industry leaders should all be gearing up to double tech exports by 2025, in the aftermath of both the pandemic and Brexit.”
“By doubling exports, UK tech could contribute an additional £23bn to the economy per year by 2025 and move up the ranks to become a top global exporter of tech.”
Trade talks between the UK and Japan over a post-Brexit trade deal were by all reports going in the right direction with both sides suggesting an agreement could be in place by the end of the month.
However, talks appear to have hit something of a hold-up. The culprit? Stilton cheese.
Talks have apparently been blown off course after Liz Truss, recently appointed international trade secretary, looked to secure a better deal regarding British blue cheeses.
A favourite on cheese boards and sandwiches in the UK, blue cheese sales to Japan only totalled just over £100,000 last year and the government will be hoping a better deal between the UK and Japan directly may trump the recently-agreed EU-Japan trade deal and serve as a boost to British producers.
Not much has come out of the government specifically relating to stilton, but Truss has recently commented that: “Negotiations have been positive and productive, and we have reached consensus on the major elements of a deal – including ambitious provisions in areas like digital, data and financial services that go significantly beyond the EU-Japan deal.
“Our shared aim is to reach a formal agreement in principle by the end of August.”
The UK has begun the first round of trade negotiations with Japan in the first step of government plans to join the Comprehensive Progressive Agreement for Trans-Pacific Partnership (CPTPP) – a trading region which covers nearly 500 million consumers from Australia and New Zealand to Chile, Canada and Peru amongst others.
Designated ‘a key UK priority’ for a post-Brexit business environment, a trade deal could boost the UK economy by £1.5bn with an agreement based on the existing EU-Japan agreement, although the UK is looking to secure additional benefits which will likely include digital trade and tighter financial cooperation.
Secretary of state for trade, Liz Truss, said she hopes a trade deal will be concluded before the Brexit transition period ends on 31st December.
“We aim to strike a comprehensive free trade agreement that goes further than the deal previously agreed with the EU, setting ambitious standards in areas such as digital trade and services,” she said.
Japan is the third-largest economy in the world with a GDP of $5.18 trillion with UK-Japan trade worth £31.4bn last year. And exports to the region have been growing, up 8.5% over the last 24 months.
Increased digital trade will prove a key part of any future agreement with Japan’s future e-commerce market set to grow by almost 30% over the next two years and be worth more than $200bn.
The coronavirus pandemic has hit food and drink exports hard with a £700 million drop in value compared to 2019, equating to a 12.7% fall.
That’s according to the Food and Drink Federation who noted whisky, chocolate, cheese, salmon and gin as the hardest hit, pulling back on increasing demand over the last five years for British whisky, gin and salmon in particular.
However, pork saw an increase in value whilst the volume of vegetable and beef exports also rose.
Sales to the EU were the most impacted with total value falling by 17.4%, driven primarily by the immediate impact of Covid-19 as hospitality and travel sectors shut down across the continent.
But further afield, the picture is a little rosier. Outside the EU, demand has remained resilient with sales of branded food and drink products increasing in the US, Australia and China. Demand for cakes and baked goods in Australia grew 12% compared to the same period last year whilst the exports of gin, bottled water and infant food grew to £34m in China. Demand for British beer and soft drinks spearheaded near-7% overall export growth to the US too.
Head of International Trade at the FDF, Dominic Goudie, commented that: “Manufacturers and the other hidden heroes working across the supply chain have ensured continued access to essential food and drink for UK shoppers during this crisis. But we can now see how COVID-19 has impacted valuable overseas sales of UK food and drink that were worth over £23 billion in 2019.
“The closure of the hospitality sector in high-value export markets in the EU and further afield has been devastating for many exporters. However, we can also see that opportunities do remain in retail channels in many markets.
“Ensuring a quick return to growth will be essential to support resilience in our industry and also the UK’s economic recovery. We are working closely with Government and industry partners to set out a recovery plan that will deliver a return to sustainable export growth right across the UK.”
The government has agreed to temporarily guarantee trade credit insurance to support businesses struggling to get cover during the pandemic.
The guarantee will help both domestic and exporting companies within the supply chain.
With almost all sectors being financially impacted due to coronavirus, some firms have seen the number of payment defaults increase, making it harder to manage cash flow as well as more difficult to get trade insurance in the first place.
The scheme will launch at the end of this month with the government agreeing to a temporary reinsurance arrangement with trade credit insurers in a move which it hopes will ‘support supply chains and help businesses to trade with confidence as they can trust that they will be protected if a customer defaults on a payment’.
John Glen, economic secretary to the Treasure commented that: “This country’s businesses are crucial in helping us to kick start the economy as we get back to work, and I will do everything I can to help support them through this difficult time.
“By guaranteeing business-to-business transactions currently supported by trade credit insurance, we will help to maintain a vital cog in our economy.”
The Institute of Export & International Trade welcomed the announced, with the director of stakeholder management Kevin Shakespear saying that: “The continuation of a viable trade credit insurance market is essential for UK businesses and maintaining supply chains.
“For businesses selling in the UK, EU and the rest of the world there are benefits to using trade credit insurance to support payment terms, mitigate payment and country risk and in some instances support provision of finance for both UK and overseas sales.”
As UK-US talks on a free trade deal officially get underway, there’s hope in the SME community that an opportunity arises which will help mitigate some of the damage caused by Covid-19.
Almost 200 negotiators will be locked in detailed discussions, via video call, every six weeks in a deal that could see UK-US trade, already valued at almost £221bn a year, expand massively. The big hope for UK exporters is that tariffs imposed by the US, especially on farming, textiles, food and manufactured goods products, are lifted.
International trade secretary, Liz Truss commented at the commencement of discussions that: “The US is our largest trading partner and increasing transatlantic trade can help our economies bounce back from the economic challenge posed by coronavirus.
“We don’t just want any trade agreement. We want an agreement that will work for small business, an agreement that works for consumers and workers, and an agreement that will benefit all regions and nations of the UK.”
Currently, there are 30,000 SMEs in the UK exporting to the US and Federation of Small Businesses surveys have found that it’s the most important export market for these businesses – 46% saying it’s their key target region over the next three years.
Mike Cherry, national chair of the FSB commented that: “For small businesses, the US is the number one single market of choice for importers and exporters for the next three years, which is why these negotiations are so critical. With our economy likely to be suppressed for some time, we are going to need small businesses that trade to lead the way.
“Small businesses are already the backbone of the UK’s domestic economy. And especially in these difficult times, we now need to see their share of global trade start to catch up. We can do this by putting SMEs front and centre of all new trade agreements.
“Securing a pro-small business free trade agreement, which includes a comprehensive and dedicated small business chapter, will be essential to addressing the needs and distinct challenges that small firms face when engaged in transatlantic trade.”
Enterprise Ireland has launched its UK Local Authority Report following working with Go Exporting to produce and provide the research and overview.
The report outlines the 353 UK councils, their structure and the opportunities they present for Irish companies.
See below for a snapshot of the report.
Enterprise Ireland is the Irish Government’s trade and innovation agency, supporting innovative Irish companies through all stages of their growth and creating connections to international customers.
Full access to the report can be garnered by contacting one of Enterprise Ireland’s UK market advisors.
Goods exports across all four UK nations rose once more in 2019 ending a strong year heading into the current period of pandemic uncertainty for businesses.
HMRC reported that, over the 12 months, international sales of goods from England rose 2% to £254bn. Scotland saw the largest growth at 4.4% to £33.6bn whilst Wales saw sales increase 3% to £17.7bn. Northern Ireland also saw strong sales totalling £9.1bn – a 2.2% rise.
The total number of exporting businesses increased by 2.6% to over 160,000. Click here to read the full report.
Positive for UK firms as the Brexit transition period began was that demand for UK goods is increasingly coming from countries outside of the EU with the USA remaining the largest export partner in terms of value. Scotland saw highest demand growth from China.
The performance of exporting businesses across the four nations has defied expectations over the last four years, riding out Brexit uncertainty to see record sales in both goods and services. However, the current coronavirus pandemic is a challenge that few firms would have seen coming and will provide the sternest test yet of organisations large and small – here in the UK and around the world.
Government-backed agencies designed to help UK businesses trade overseas are reportedly struggling to meet targets as SMEs show reluctance to sell overseas.
That’s according to a report from the British Business Bank which found that exports from small and medium-sized businesses account for just 32% of UK exports, down from 50% 11 years ago.
The report had set out to explore whether access to export finance and monetary support, in general, was fuelling the decline but found that SMEs don’t believe they lack access to the finance they need – although lack of support from banks and advice on the risks that come with targeting new markets were stumbling blocks.
The report stated that: “The evidence shows that supporting SMEs to establish and grow is more important than providing them with better access to finance specifically to support their exports.
“SMEs are reluctant to take on additional external finance, even if it means accepting a slower growth rate. 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.”
Whilst almost 40% of SMEs who took part in the study said they had taken on some form of additional finance, only 8% was allocated to exporting activities. Meanwhile, a quarter of firms who were already selling overseas said they were experiencing a lack of time and other resources to sell domestically – let alone internationally. For businesses that have yet to start trading on the global stage, over half say they lack the personnel resource to do so.
The government has been active in supporting exporters, especially since the EU referendum, including the launch of new digital tools and enhancing grants to support in areas such as customs declarations, IT and training.
However, many businesses still lack the experience or in-house know-how to really make a go at selling their products and services overseas. That’s despite the fact that, on average, SME exporters generate an extra £287k in sales each year, with 1 in 10 boosting profits by over 20% in the process. Yet only 5% of SMEs are considering exporting for the first time in the next 5 years.
The opportunities open to UK businesses to explore expansion into foreign markets is something we at Go Exporting are passionate about, already supporting organisations to identify high-potential markets and forge new partnerships and distribution agreements.
If your firm is considering exporting, or has begun but would benefit from outsourcing key research and growth management tasks to a specialist exporting consultancy, learn more about our services here.
Businesses are being urged to apply for large grants to help complete customs declarations.
Offered by HMRC, there are three grants available designed to help the recruitment, IT and technical requirements that companies will face when completing customs declarations and processes.
There is also funding available for customs intermediaries for the hiring of new staff and IT improvements too.
Here’s all the information on the gov.uk website.
What the grants are for
The three grants cover recruitment, training and IT improvements. Core businesses requirements are that you are established in or have a branch in the UK when the grant is paid, and that you’ve not previously failed to meet tax obligations (for which HMRC will check).
Businesses can only apply for one of the three grants available, too.
The recruitment grant is available to businesses that have been established in the UK for at least 12 months and currently complete customs declarations on behalf of importers and exporters.
The funding must be used to cover recruitment and salary costs of new employees from October last year where those employees are in a role designed to assist with the completion of declaration forms.
The grant affords up to £3,000 per employee, up to £10,000 for any employee recruited before 31st January 2021 (to cover the first-quarter salary) and also 50% reimbursement on recruiter fees.
The training grant is available to businesses which import from or export to the EU and either currently or intent to complete customs declarations.
The grant can be used to cover upskilling employees in areas such as completing customs declarations, carrying out customs processes including relevant training in safety and security, as well as other import and export processes.
The grant can be used to either support the costs of in-house or external training but cannot be used to fund the cost of existing training programs.
The grant available for training is up to 100% of the cost to the employer, limited at £2,250 per course or £250 per employee for in-house training.
IT improvements grant
The IT improvements grant is available to businesses with fewer than 250 employees and an annual turnover of less than £50 million – which are currently completing customs declarations for imports and/or exports.
It’s designed to help cover the cost of funding software purchases but that software must be an off-the-shelf solution and not be used to part-fund a self-built program.
The grant can also be used to reimburse former expenses on relevant IT improvements since 31st July last year and covers areas such as additional hardware for the customs software to run on, installation and configuration costs, one-year’s license fee of the software and staff training.
Learn more and apply to the Customs Grant Scheme, which has been extended until 31st January next year, here.