A “perfect storm” of rising inflation, currency volatility and questions marks around Brexit has created an uncertain environment for the UK’s small exporters in 2017. Now, research finds that as many as 70 per cent are expecting to trade less with global markets in the year’s final quarter.
According to international payment platform WorldFirst’s Global Trade Baromoter, the number of small businesses trading internationally continued to fall over the course of 2017. In Q3, just 28 per cent of small businesses made a foreign currency transfer per month, compared to just under half during the same period in 2016.
As the UK government begins to identify future trading partners after the country leaves the EU, the research revealed a trade decline in global markets as well as Western Europe. Although European countries remained the UK’s dominant trading partner, followed by the US, exports fell across every region.
When asked of their outlook in the same report three months ago, business owners cited rising inflation, falling consumer spending and currency volatility as the greatest threats to their company, with factors such as interest rate increases and government policy contributing to the uncertainty. The latest findings have shown these fears to remain at the fore of owners’ minds.
The top ten issues Britain’s small exporters expect to harm their profitability in Q4
|Concern||Impact in Q4 2017|
|Rise in inflation||25 per cent||Remains at 5.5 year high of 3 per cent|
|Fall in consumer spending||24 per cent||Retail sales fell 0.3 per cent in October|
|Currency volatility||20 per cent||Ongoing since Brexit decision|
|Change in government policies||18 per cent||Unknown until Autumn Budget and Brexit deal finalised|
|Cash flow||17 per cent||N/A|
|Increase in interest rates||14 per cent||First rise in a decade, from 0.25 per cent to 0.5 per cent|
|Increased regulation in the UK||14 per cent||Unknown until Brexit deal finalised|
|Limited talent/issues with recruitment||13 per cent||First fall in employment since Brexit vote|
|Increase in business rates||11 per cent||Planned to rise in line with CPI by 3.9 per cent in April 2018|
|Increased consumer debt||11 per cent||Annual rate of growth of 10 per cent|
Commenting on the findings, Jeremy Cook, chief economist at WorldFirst, suggested that UK exporting’s newest entrants were most likely to suffer from the increased costs of doing business and political uncertainty.
“In Q3, the percentage of SMEs trading internationally fell to 28 per cent, the lowest we’ve recorded in nearly two years. However, average trade values rose, suggesting that the SMEs that are ceasing international trade are those at the smaller end of the scale,” Cook said.
“So, while larger businesses may remain resilient and exude confidence, smaller businesses are quietly, but quickly, turning their back on wider global markets.
“The double-edged sword for small businesses is that by holding back on international trade, they might be limiting their business’s potential for growth and profitability, narrowing their consumer base and not taking advantage of opportunities that lie beyond the British Isles.”
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