In 2014 the Federation of Small Businesses found that small and medium sized businesses (SMEs) were keener than ever to export goods and services overseas. By exporting overseas SMEs open the business to more markets and increase the opportunities to sell products and services. In addition, exporting to foreign countries allows SMEs to take advantage of favourable fluctuations in currencies and also reduce their exposure to volatility in local market conditions.
Evidence exists that demonstrates start-ups and SMEs with an international outlook are likely to fare better than their contemporaries which remain focussed on local markets. The benefits of SMEs exporting were highlighted in a PwC study conducted in 2012 which showed that those which exported tended to do much better economically than those that stayed within domestic markets.
Barriers to Exporting
Exporting overseas can be hugely beneficial for SME businesses but there are numerous barriers which must be overcome in order for an export strategy to be successful. These include accessing sufficient capital to cover upfront costs of exportation such as shipping, insurance and marketing, overcoming the difficulty of finding overseas customers and tackling a host of legal issues that arise.
SMEs should be aware of the regulations which operate in relation to exporting, such as:
export restrictions that exist or licences that are required in the countries they are considering exporting to, such as military software and technology;
when managing exports from the UK, their relationships with any agents or distributers in overseas countries are covered by enforceable contractual agreements with clear jurisdiction clauses establish the place which disputes will be resolved and the law governing the disputes with agents;
tax implications both domestically and in the target export country, and whether there is a double-taxation tax treaty applies.
Is there support for SMEs wanting to export?
It is crucial that proper support and advice is available for SMEs looking to export given the barriers that exist and the regulatory and legal complications they are likely to encounter. Currently SMEs that considering exporting may be forgiven for thinking that there is not much support available but the reverse is in fact true.
The Federation of Small Business, the government’s UKTI department and other bodies supported by the government have created a variety of programs to aid and satisfy SMEs in their export ambitions, including:
International Festival for Business;
Gateway to Global Growth;
The Export Marketing Research Scheme; and
The Export Communications Review.
There are also more general schemes to help SMEs such as the Regional Growth Fund, the Business Finance Partnership and Small Business Saturday. Meanwhile around £4bn has been made available in funding to support SMEs looking for boost growth.
However, the Federation of Small Business suggests that governmental support must be made easier for SMEs to access and awareness needs to be raised for the support that currently exists.
Towards the end of 2014 Open to Export, an online meeting point for export businesses supported by UKTI, the Federation of Small Businesses and HSBC, reported that 78 per cent of business owners and managers were optimistic that 2015 will see an improvement over 2014. Europe and North America were seen as the best export markets by businesses with around 60 per cent targeting the former and around 45 per cent targeting the latter to increase sales.
Despite these encouraging figures, an Federation of Small Business survey earlier in 2014 found around 30 per cent of Federation of Small Business members struggled with accessing government support and a further 45 per cent were unaware of the available assistance. It is therefore essential that professional advisers can offer their clients information about the help that is available to ambitious SMEs.
Article written by Leigh Ellis who is a lawyer in London advising businesses on the legalities of exports , including technology used in military applications, commercial contracts, and breaches of contract, and resolving disputes and litigation.