No gain without a little bit of pain

No gain without a little bit of pain

The issue: How can UK businesses maximise their export success? And are the support systems currently available adequate to help them do this?

Taking PartRobin Oxley, a patent attorney and head of Marks & Clerk’s Birmingham office, welcomed everybody and explained his interest in hosting the evening. He said: “We have many clients who say: ‘I’m thinking about starting exports, what do I have to consider?’

I think I know some of what that is but I’m always very glad to hear other peoples’ views so that I can help clients to increase their exports… I’m sure there’s lots of tricks I can learn from you guys, and hopefully I can share some of the tricks I’ve learned.”

The evening’s guests then introduced themselves and their interest in exports. Martyn Hale is chairman of HME Technology, a market leader in design, technology and science equipment for schools. He told how his company picked up its first contract with new academies in Saudi Arabia last year.

Paul Brown, director of government and the public sector for EY, said: “We have created a ‘growing beyond borders’ tool to identify countries and markets companies should think about exporting to, using macro-economic data. It’s a fantastic piece of work that we do with clients to help them think about should export, and do they want to put the effort into this…

“You’ve got all the statistics – if you export you’re more resilient, you’re going to grow, you’re ambitious… We did a report back in 2011 called ‘Winning Overseas with the CBI’ trying to tackle government to put more effort into supporting companies to export, and certainly this government has taken on some of those aspects, but I think we could do much better. I sense there’s still a bit of apathy around businesses thinking of exporting.

One in five in this country are exporting, it’s one in four in Europe – why is that? It can’t be just that the markets aren’t there, I think that sometimes we think as an island nation.”

Professor David Bailey, of Aston Business School, reflected on how the UK’s trade figures were “utterly dismal” in February, with the biggest February trade deficit for four years. He said export growth in the UK was up only 14% in the last three years – although a growth of 46% in the West Midlands was doing the “heavy lifting” of rebalancing the economy.

But he said the overall figures showed the government’s aim of “exporting out of recession” was just not happening.

He described how companies had reduced or ceased exporting at the time of the 2008 recession and said: “Getting back into export markets involves a certain cost and we’re not doing enough to support companies.

There has been some improvement – things like export credit finance guarantees – but we don’t go far enough, it’s still not as generous as Germany. We need to think much more holistically about how we help our manufacturing base.

80% of our exports are manufacturing, and unless we have a much more proactive industrial policy we’re not going to push that much further.”

Pietro Cardente is international sales director of Conex Banninger, the plumbing pipe fitting and valves specialist. He compared the way other European countries helped their companies to export by describing a trade show he was at in Dubai: “There is a British pavilion which consists of a dozen or so stands supported by the UKTI [UK Trade & Investment].

You just have to look down the aisle and the German pavilion is about six times the size. The Spanish pavilion is about four times the size. Everybody else seems to have much more support.”

John Ferdinand, an associate and trademark attorney at Marks & Clerk, said a lot of what the company does for its clients has an international focus, dealing with potential risk of entering new markets.

“What I’m interested in is when you take the plunge and enter a new market: how businesses have made that leap, where they’ve dealt with that risk and it’s paid off, and where they’ve had a really bad situation and it hasn’t worked…”

With regard to government support – or its perceived lack of support – John said: “I’m interested in what seems to be an expanding knowledge base of the implications of entering new markets, and the limitations in what we’re doing at a practical level to facilitate entries into new markets.”

John Phillips, regional director for the Institute of Directors [IoD] in the West Midlands, said he was recruiting a group of non-executive directors with exporting experience to help companies that weren’t currently exporting, but who the UKTI felt had great potential. He said: “The idea is we mix the two together and end up with some ‘magic’.”

He added: “For me personally, I’m quite passionate about foreign languages. I believe that English is both a curse and an advantage… If I had one wish, it would be that we could start our language learning in primary schools.”

Mark Henderson, a trade director at Barclays Bank, explained how his role was to help importers and exporters manage the finance risks involved – essentially “making sure you get paid”.

He said one of the things that constantly surprised him was companies’ “lack of willingness to utilise all the different payment methods that are available for exporters.” He said he was keen to raise awareness for companies on what assistance was available.

Stephen Hynes, strategic marketing director of industrial castings and sealant specialists Ultraseal International, said 98% of his company’s trade was export. Ultraseal trades in more than 40 countries, and has had more than 25 years’ experience in India, 20 years in the USA and seven years in China.

He said: “Our main challenge is understanding markets. A lot of that comes down to experience.” He talked about entering Russia, which he was initially warned against, but said by asking other exporters who were experienced in the “volatile” area he decided the risks were worth it.

Stephen said a lot of the advice they received didn’t come from government bodies, but came from asking questions via Chambers of Commerce and private companies.

He said: “My main point tonight is that everything available in terms of finance and grants is for new exporters. As ‘experienced’ exporters, we’re restricted. If you don’t give money to mature ones how is their manufacturing going to grow?”

Martyn Hale agreed with Pietro that Germany was more supportive to its exporters, helping them to approach markets as a group of companies, and that it was “disappointing” that the UKTI did not offer the same levels of assistance. He also agreed with Stephen that more was needed to help experienced exporters to get more out of markets.

Martyn said: “It’s alright for the prime minister going out like a cavalier to India, China and South America with his group of high-level plc companies.” He said this may well trickle down to new work for various sub-contractors across the West Midlands.

But he added: “For people like us who’ve got a finished product, it’s not easy. We need more help. One of the biggest challenges we have is that we don’t think the UKTI is fit for purpose.”

Stephen Hynes said: “A lot of it comes down to a real understanding of international marketing. To export successfully you need to treat each country as an individual market. We’re talking about understanding the culture, price sensitivity, the British brand… You also need to be courageous and understand who you talk to… We don’t always give the UKTI enough credit, they can point you in the right directions.”

But Paul Brown insisted that the UKTI was still “underperforming” in its reach to businesses, often because the businesses themselves were not persuaded to engage with them, nor with local Chambers or the IoD.

He said: “70% of businesses are aware of these organisations, but less than 10% use them. A third of businesses are aware about exporting but decide ‘it’s not for me’. How do we get people over that hurdle to think about exporting?”

Pietro Cardente said: “Part of the problem is I don’t think we’ve got the right people there [at the UKTI) to advise, or if they are the right people they’re not getting paid the sort of money they should be getting paid.

Secondly, I don’t think some of the help out there is well known. Take the OMIS reports [the UKTI’s Overseas Market Introduction Service], I use them all the time. For £3,000, Australia for example, I’ve got a market that’s now worth £18m a year.

“That saved me the bother of going out there and looking around, knocking on doors. They were warmed up leads and I was able to go there and find the right partner. So they’re well worth the money… At the end of the day the UK’s 60 million people. There’s a hell of a lot more people out in the big wide world.”

Stephen Hynes agreed: “I think as an island nation we’ve forgotten how to export. Some companies culturally aren’t comfortable with it and never will be.”

David Bailey said: “There’s been an improvement in recent years, but not at a national level. Regionally, we’ve done a fantastic job. Now half of that is probably JLR and JCB, but there are a lot of other companies in the automotive supply chain, in aerospace, in green technologies – we’ve really diversified the regional economy.

“Something’s happened regionally which is quite different to what’s happened nationally. Partly that’s because those companies have embraced new export markets beyond Europe, partly because they’re producing products that people want around the world, and because we’ve developed technologies in industries that we can sell internationally. But it’s down to the companies.”

Robin Oxley asked: “Is the question for the UK just: ‘If you do what the West Midlands has done that will fix it?” David Bailey said: “Regions have got different specialisms, and so you can’t transfer it necessarily, but clearly we’re very good in the West Midlands at advanced manufacturing and services linked to it. We’ve been able to position ourselves at producing products that appeal very much in growing economies around the world.

“That part is translatable – whatever product or service you’re producing, look beyond Europe. Europe’s still very important, it’s our biggest export market, but the really big growth is taking place elsewhere so think more broadly.”

The debate’s chair, Caroline Theobald, asked if the help out there in terms of language was “fit for purpose”. Pietro Cardente, himself a language graduate, told how when he was looking for a job 25 years ago with skills that he thought were marketable, it took him two years before he found his first proper job with a company that valued languages.

He said: “It still seems that it [exporting] is just an additional thing that companies do rather than a main activity. I don’t think necessarily being proficient in every language in every market you’re in is necessary but at least having that cultural awareness, having a few words just to get by, it breaks the ice.”

Stephen Hynes said: “I think you do need a local partner – it’s not just about languages. Someone who can be there when things go wrong. Having someone on the ground and able to respond very quickly. Having a local partner who speaks the language, knows the culture and has strong relationships.”

John Phillips said: “My dream of languages is really a very long-term aspiration of starting off with toddlers. If you live in a country with a minority language then you have to learn the global languages – Mandarin, Spanish and English – and people somehow manage to do that. I just think it would be a great legacy to leave for future generations.”

Live Debate 02Mark Henderson agreed, and gave an example of a customer exporting to Germany who took on a credit controller who just happened to be a German speaker. “Immediately, they were able to bring in debts quicker, reducing days from 90 to 60, and the difference they found was massive. It was a huge benefit to protect their margin and bad debts, and also the working capital benefit which had a knock-on effect on what else they could do.”

Paul Brown said companies they helped were encouraged to use EY offices abroad, along with UKTI services. He said: “The language bit is a nice thing to talk about. It’s sort of there as being quite important, but is it the big panacea? No. Does it help? Possibly.

If you look at the top things for exporters, it’s regulations number one, it’s contacts on the ground number two. They should visit sites, they need to exploit UKTI and all their business contacts as much as they can. Language is nice but it’s not the answer.”

Paul Harris, senior tax manager with PwC, said what helped exporters was having knowledge on the ground. He said PwC was normally involved when a business has decided to make exports to a particular country and was thinking about tax and how to structure it.

He said: “The most useful thing is to get them speaking to someone locally, understanding the culture of the country and regulations, and how you should talk to businesses and get introductions is absolutely crucial.”

Paul also defended the UKTI, which he said seemed to have taken “a bit of a battering” and said: “We’ve spoken to a number of SMEs that are looking to export for the first time, and they have found the UKTI very helpful.”

Robin Oxley said how, as a more mature exporter, Marks & Clerk needed to differentiate themselves from other European businesses. He said: “To tie in everything about the language, it’s the man on the ground. We don’t have an office in Korea, we have a Korean lady on the ground.” He said this enabled them to respond quickly in Korea, and to sort out problems that would otherwise be tricky.

Paul Harris talked about how different countries’ regulations were sometimes a barrier, and said that “more could be done to help” at a government level. He said: “If governments could get together and only have regulations and changes that were actually needed, rather than just because they’re parochial, that would help.”

Pietro Cardente, with his international plumbing experience, agreed that regulations and testing required in different countries was often a “money-making exercise” and a “barrier to entry”.

Paul Brown said that successful exporting was all about knowing the right person, with the right experience to speak to. John Phillips said this was what his new network of non-executive directors with exporting experience was all about.

He said: “It’s to take the success of the best people and transmit that. If it works, we’ll share it. We’ve had people come forward who are interested and have a group of good people with a great track record. If it works, we’d like to do it nationally.”

David Bailey said: “Companies that cooperate more and innovate more are more successful in all sorts ways, and that’s exactly what we should be doing. We should remember that in Germany and other countries, being part of a Chamber or some sort of organisation is a compulsory requirement, so they’ve got all this networking and sharing in place, and we’ve kind of got to invent it really.”

Paul Brown said that the vast majority of businesses don’t touch any such organisation – whether it be the IoD or local Chamber – and that this meant the “big issue” was how to get the message out there. David Bailey said: “If those networking organisations can do it collectively, that’s a very powerful way of spreading knowledge.”

Paul Brown said: “We’re going to have some great stories to tell, but it’s very difficult to get those businesses to engage. Things like compulsory membership may be a way, but it’s probably unpalatable in this country.”

Pietro Cardente said: “Are there enough of the right people out there to go and do exporting? My philosophy has always been: make it as easy as possible for the guy to buy it from you as it is from a local company. It’s all about that relationship.

“Are there enough people out there in SMEs or even bigger companies who have got those personalities to go into different cultures and engage with people? So it’s all well and good setting things up on a higher level and making things compulsory, but have people got the skills – whether it’s language or culture or understanding – to go out there and do it?”

John Ferdinand agreed and said: “It’s understanding what the other person’s saying, how they talk to each other. It’s encouraging that ability to step into someone else’s shoes and get to know how they’re thinking, what language they use, that would maybe help breed those kind of skills.”

Stephen Hynes said: “You need to employ someone with experience, someone who understands the export market, knows how to deal with an international customer. We recently employed someone who’s Chinese to help sort out daily issues in China.

She’s achieved something that would probably have taken us years. She’s young, vibrant, hungry and has broken it down into a cultural level.”

On finance, Mark Henderson said: “Speak to your bank manager. They’ll bring in people like myself, for trade finance, bonds and guarantees to fulfil export contracts. The key is early engagement. Being prepared to do a forecast. The bank might want to see a copy of the contract, up-to-date quarterly information, forecasts for the next 12 months.

“Exporters have to be prepared to give a little back… to make sure you’re securing yourself against potential bad debts and making yourself as appealing a supplier as possible to those export customers... We don’t profess to know it all about exports, but we will always try to point our customers in the right direction – UKTI, lawyers, accountants, UK export finance, business councils – there should be a joined up approach.

“One of the things we actively encourage is not to speak to them all individually but try to get us all in the same room together – it’s a better use of exporters’ time, and they’re all working to the same end.”

Discussing final practical tips, Paul Brown said: “Exporting should be part of companies’ business plans. What’s unacceptable is not thinking about it. I think we have an aspiration deficit in this country. It [exporting] should be part of someone’s day job.”

Stephen Hynes agreed: “I don’t think it’s a shame that some companies don’t want to export, but you’ve got to have a reason. Do your market research. You don’t have to jump on a plane and go somewhere. Ask: what are the first steps? You’ve got to envisage your goods going overseas.”

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Paul Harris said: “You’ve got to look at the cash flow. When are you going to get paid? And also the taxes.”

Martin Hale was more daring. He said: “Go! Twenty years ago we had a small enquiry from Hong Kong and ended up doing seven schools, and they’re still buying from us now.”

David Bailey agreed: “Go – be fleet of foot, do your research, and if there’s a market go for it.”

Pietro Cardente added: “Agreed, but do the research first. For me, the easiest way, certainly selling products, is the OMIS reports.”

John Phillips said: “I would say if you’ve got a brilliant product, you can be very proud of it, there’s a lot of help out there, and it’s not going to cost you a lot of money because there are people willing you to do well. So go, but go with help because there’s a lot around.”

Mark Henderson said: “There is a lot of help around. Do your research into what levels of advice are available. Dip your toe into all those advisors, which ones you rate, which you don’t. And use them.” And Robin Oxley added: “Just engage – but with eyes open.”

Martyn Hale lightened his conclusion with a story: “There was a shoe salesman going to Africa. He was told: ‘Don’t go over there, they don’t wear shoes.’ But he replied: ‘I am going over there, I think they would love to wear shoes.’”

John Ferdinand, on behalf of the Live Debate’s host Marks & Clerk, thanked everyone for their input and for providing a “great bank of knowledge” for BQ West Midlands readers. He said: “It seems a lot of it is common sense. The overriding things are getting to know the market, to do your research and to get the best information.

“Having that language ‘outlook’, in the sense of understanding how other markets work. And in terms of the support systems, there’s clearly some disagreement about that, but certainly try a peer review, other people who’ve gone through the same thing. There’s clearly more that can be done from a government level to engage businesses in making sure they use the resources available to them.

Things like the OMIS reports – they’re available. The best way of support is through collaboration – whether that’s government initiatives or local Chambers. It’s there, it’s how you manage to find it.

Is it all worth it? Well, the fact that Stephen’s business is 98% exports, the fact that Pietro’s move, for example, into Australia has massively grown a market in a few years from nothing, and the fact that Martyn’s had significant success with a new order in the Middle East, really shows that most successful businesses are exporters. So it definitely is worth all that pain and effort to get there.”

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