Containers ready for export
The majority of the UK's small to medium-sized businesses are planning to enter new markets in the next two years and more are planning to look beyond the Eurozone for new trade than within it, according to new research by Albion Ventures.
Despite being the UK’s largest overseas trading partner, over one in five (21%) SMEs are planning to do more trade with countries outside the EU over the next two years compared to 16% who are targeting the single market.
The report shows that appetite among SMEs to target new overseas markets since the Brexit vote has grown from 34% in 2015 to 37%, significantly more than those who are focused on expanding domestically (29%). A further 13% small businesses plan to grow through launching new products and improving their online services.
The fourth Albion Growth Report, designed to shed light on the factors that both create and impede growth among over 1,000 SMEs, shows that medium-sized companies are more likely to be looking to expand into new markets (76%) than small businesses (50%).
Breaking into new markets is not without its challenges; in fact half (50%) of firms who have taken the plunge reported experiencing problems, the biggest were not having the right staff (13%); lack of expertise in the new market (12%); regulatory obstacles(11%); and strong competition (11%).
In sector terms, more than three-quarters (79%) of transportation firms are planning to enter new markets, the highest of any sector. Manufacturing businesses (75%) and the tech sector (72%) were second and third respectively. The manufacturing sector is clearly the most positive about continuing relationships in Europe, with 34% looking to enter new markets in the EU.
In preparation for the push into new markets, more than half (54%) of SMEs are developing new products/ services, developing/expanding their website (38%), and a quarter are expanding their sales team (25%).
Patrick Reeve, managing partner at Albion Ventures, said: “The good news is that most SMEs plan to grow by tapping into new markets. Given the uncertainty of our long-term trading relationship with the single market, policymakers will be pleased that small businesses are increasingly looking beyond the Eurozone for new overseas growth opportunities.
“This strategy makes sense in theory but many CEOs will know that it’s tough to execute in practice as they often lack the right staff, expertise and regulatory know-how. This is where fast-growth firms can benefit from partnering with an experienced equity investor, which can provide valuable hands-on support. For businesses that get it right, conquering new markets can have a transformational impact.”
On a regional basis, SMEs in London are the most likely to enter new markets in the next two years (68%) followed by those in the North East (61%) and Yorkshire & the Humber (59%). Small firms in the East of England are the least inclined to break into new markets with only 46% planning to do so, followed by those in Wales and the South West (both 47%).