Growth – somewhere beyond the sea

By David Bywater, Tax Partner, KPMG in the UK

For many small businesses who have survived the global downturn, news that the economy is getting healthier will be much welcomed and thoughts now will be turning to how SMEs can achieve sustainable growth despite the relative low growth in the UK economy.

Further afield, the emerging economies, such as the BRICs, Latin America, and some African nations, are achieving much greater levels of growth, and an increasing number of SMEs are considering how they can grab themselves a piece of the action.

Over the summer, the Office for National Statistics, revealed figures that showed that the UK’s monthly exports to China have hit £1 billion for the first time and the trade gap narrowed to £2.6 billion in April. The British Chambers of Commerce has also announced a record proportion of UK services companies reporting an increase in exports in the second quarter of 2013.

This suggests that we are succeeding in building some positive relationships outside the troubled Eurozone, and that the UK’s export agenda might just be working.

Despite the perceived challenges that may face SMEs when they consider international expansion, many see it as the natural next step – particularly when we consider how many emerging businesses in the UK are being driven by the rapid changes to technological platforms and new behaviours such as the evolution of supply chains.

As discussions take place regarding the UK’s place in the EU, it is notable that much of our SME community in the UK is already doing business with Europe, which remains an unpredictable place to do business. Therefore, looking towards the fast growing emerging economies will be a vital growth strategy.

New markets being considered for further expansion include Russia, South America, the Middle East and China – unsurprising as it has been predicted that China will become the world’s largest economy by 2019. Launching a new business can be daunting, but this does not compare to the challenges of doing business in a foreign market, where laws, regulations, health and safety standards and environmental risks can differ substantially from the home market. 

There is more that needs to be done in helping those businesses reluctant to diversify or spread themselves too thinly, as this may be an opportunity missed.  Perhaps therefore more education is needed to make businesses aware that many overseas markets have lower barriers to entry and more favourable competitive environments in particular sectors (such as electronics and industrial products ), which will help to create new investment opportunities. 

In particular, there is more that advisors can do to help drive awareness of the wide ranging support that can be provided by UKTI to businesses who are looking to trade with, or even invest in, new territories around the globe.

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