Smaller firms need advice before they can expand abroad
LEGACY was one of the reasons London won the rights to host the unquestionably successful Olympic and Paralympic games. We all get a warm glow when one of our medallists pops up on Question of Sport or we read statistics showing that thousands are trying new sports. But are we getting the same buzz from the UK businesses that were promised their own legacy – a dividend from the games?
With 2012 looking like another lost year for the domestic economy, and with the balance of trade deficit reaching £4.2bn in August, the task of helping UK businesses to export has become critical. That challenge falls to the advisory community (including accountants), to banks and to government. And these groups – the equivalents of the Olympic coaches, sports psychologists and sponsors – must ensure that businesses are fully prepared before they compete. Too often, that preparation is lacking.
PREPARING TO EXPORT
If businesses are to be successful in the export market, they – and their advisers – must be honest about where they are now, and which facets of the mechanics of export might need addressing. With that in mind, ACCA invited large and small export businesses, professional advisers, banks and other experts to give their insights at three roundtable discussions in London, Cardiff and Glasgow. Participants had an opportunity to vote on and debate key issues.
The UK’s standing as an international brand was still seen to be a significant asset, particularly in the wake of the Olympics and the Diamond Jubilee celebrations. However, while a good international standing undoubtedly helps open doors, it is no substitute for preparation.
Larger businesses and their representative bodies put considerable resources into building their brand in target export markets. This includes the preparation of an export strategy that maximises returns.
However, anecdotal evidence suggested that small businesses, new to export, do not always conduct themselves well abroad and risk damaging the national brand. Examples include failure to present themselves and their businesses effectively, using colloquial English, or failing to find out whether interpreters would be required at meetings.
We also asked exporters which countries and regions they currently export to, and which they see as significant in the next five years. For London businesses, the Middle East is currently most important region, with Europe second. South America and Asia were highlighted as the real growth areas in the next five years.
While the Middle East was seen as a potentially lucrative destination, exporters felt that businesses should concentrate on establishing themselves and expanding there before looking further afield. Although emerging economies still post growth figures and attract headlines, these markets can be challenging and require a great deal of research on cultural issues prior to entry.
Established markets like North America and Europe, particularly Germany, should not be ignored in favour of emerging economies. However, the complexities of these markets should also not be overlooked. North America has as many regional variations as other large markets, and business people in the US have high expectations. Exporters said this is something would-be exporters should bear in mind.
WEIGHING UP RISKS
We also asked roundtable participants about the risks and obstacles faced by exporters. In London, cultural and language difficulties were rated as the most significant barrier to export success, with 29 per cent of the vote. Legal and regulatory issues, tax and customs, finding contracts, intellectual property (IP) issues and costs were all given equal weight, with 14 per cent of the vote each.
Other issues highlighted included: incorrect pricing, cultural misunderstandings, foreign exchange, bad debt, insurance, lost goods, delivering on time, failure to clear customs, labelling and classifying goods correctly, IP protection and the need to be sceptical about research based on statements made on the internet.
The issue of IP protection was seen as critical for potential exporters to consider at an early stage – or risk new products being copied in markets where IP is not respected.
THE ROLE OF GOVERNMENT
The overwhelming view from all roundtables, particularly London, was that government needs to do more to support export activity, with the emphasis on taking a long-term view.
With no UK growth anticipated for as long as five years, tax incentives and help with the practicalities of exporting are now imperative. Potential exporters believe that government should ask what each new measure it proposes will actually do for growth.
Large businesses are very effective exporters. But they make long-term investment in overseas trade and can gain government support at a high level. Roundtable participants said that, for government help to be meaningful, it must be consistent.
Businesses were frustrated by how little UK Trade and Industry (UKTI) is empowered to help smaller businesses – a factor, ACCA believes, that further underlines the need for a more co-ordinated approach from government policymakers.
While the majority of businesses finance export activities through their usual business facilities, in London businesses said that working capital could be a big barrier to export. There is a need for greater education about financing schemes and practices.
All these challenges, alongside the imperative for businesses to try to export more, create a pressing need for the best possible advice. With accountants seen as trusted advisers, our profession has a responsibility to ensure business gets that advice. And, along with lawyers and bankers, we also have a duty to balance messages about the need for preparation with the fact that small enterprises are often time poor. They will need external affordable help to prepare them for the export challenge.
The bottom line is that businesses of all sizes need accessible, practical help if we are to embed export into the psyche of British business. ACCA is committed to working in partnership with other bodies to provide information for potential exporters in the coming months.
Andrew Leck is head of ACCA UK.