Insurance · 5 February 2016

Small exporters most threatened by potential Brexit

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The vast majority of small exporters think the government should be doing more

Over-dependence on European markets combined with uncertainty surrounding the possibility of a UK “Brexit” is holding back small firms, stalling exports and preventing business growth, new data has revealed.

The majority of small exporters believe that the government is not supportive in dealing with Brexit, whilst 66 per cent have now called for greater clarity on the UK’s future role in Europe.

A report published by commercial insurer RSA found that the UK’s small businesses could be disproportionally impacted should Britain decide to leave the EU in the imminent referendum, with many still dependent on EU markets despite increasingly wanting access to the growth opportunities offered in emerging economies.

While four out of five small businesses claimed access to markets outside of the EU is important to growth, 72 per cent said exporting beyond the EU’s borders was a struggle. Part of the problem, according to three-quarters of small firms, was the government’s for lack of support when exporting to emerging economies, with 80 per cent calling on the government to do more to champion small UK exporters.

SME director at RSA, David Swigciski, said that the government framework to support small exporters is outdated and damaging: “Current government export support isn’t working for our smaller businesses, who are struggling to trade beyond Europe.”

“The UK’s SMEs are stuck in the gravitational pull of the EU. Not only are our SMEs missing out on growth markets, significant risks are faced from uncertainty over a possible Brexit and our future relationship with Europe,” added Swigciski.

The report demonstrated the extent of small exporters’ dependency on the EU and the need to look further afield. Over 80 per cent said that European markets were important to the future growth of a business, whilst over half added that it was very important. Furthermore, a quarter of small exporters described the business as European.

The perception that small firms are local by default is reportedly damaging growth prospects, as almost nine out of ten small exporters described extending international reach as important for the small business community as a whole.

“Small exporters are telling us that the perception of the UK’s small businesses as corner shop owners is damaging,” Swigciski went on to say. “We need a 21st century framework for the 21st century SME. Government policy needs to be updated to support internationally-minded businesses if small exporters are not to be caught out.”

The US is considered to be the most important new market opportunity for small exporters, followed by Asia, the Middle East, South America and Africa.

The report showed a startling disconnect between government-led initiatives to boost exporting and sentiment amongst small exporters, suggesting the recently-launched “Exporting is GREAT” campaign and the export target of £1tn a year by 2020 may be failing.

Relaxing the restrictions around trading with emerging economies would be a significant factor in encouraging exports, the report found, as would less red tape, with 74 per cent of small exporters stating that the regulatory burden prevents international growth.

Want to know more about exporting to the US? Read our experts guide.

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ABOUT THE EXPERT

Fred Heritage was previously deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London.

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