Small UK businesses are bullish about international trade, and have been taking advantage of the weak pound to increase overseas sales since the EU referendum, according to a new survey.
Commissioned by international payments company OFX, the data show that whilst inflation is beginning to bite at home, entrepreneurial SMEs are shifting their focus to global sales.
Of the 500 SME owners and senior managers surveyed, two-thirds said they feel confident about doing business overseas (67%). Since the EU referendum, almost half have increased international sales (48%), while 36% expect to start or increase exports in the next twelve months.
Inflation bites at home
This increase in overseas sales comes in the context of a more challenging domestic market. Since the EU referendum, 28% of the SMEs surveyed have seen sales decrease to UK customers, while 44% say rising inflation is the biggest current concern for their business.
Almost half (49%) have raised the price of goods or services in the last year – and the weak pound is the single biggest reason for doing so (62%), having made raw materials more expensive. Indeed, 44% of SMEs have stopped or reduced imports in the last twelve months.
Nimble and resilient SMEs pivot to global trade
Overseas, the weak pound is making British goods and services more affordable for international buyers – and UK SMEs have been quick to take advantage of the situation. Of those that plan to increase exports in the next year, 46% are doing so because of declining UK sales, while 1 in 5 want to make the most of the weak pound (21%).
4 out of 5 of the SME decision makers surveyed now export goods or sell services outside the UK (80%), and for more than half (55%), international trade now represents at least 10% of revenue.
Jake Trask, FX research director at OFX, says: “Following the referendum, small businesses have shown their resilience by turning a weak pound into a real opportunity. While not all SMEs supported Brexit, their size, optimism, and entrepreneurialism have allowed them to adapt swiftly to a changing market. We expect to see more of this fighting spirit as Britain prepares its exit from the EU.”
USA an attractive market for trade
For small businesses looking to start or increase exports in the next year, the USA is by far the most attractive market.
The number of SMEs currently doing business with the US (48%) is on par with those trading with Western Europe (47%). However, only 20% plan to increase European exports in the next twelve months, compared to the 62% who plan to increase exports to the USA.
SMEs see Brexit as an opportunity
The majority of SMEs think their business will either be better off once the UK leaves the EU, or altogether unaffected (63%).
Those that trade with the USA are even more likely to see this as an opportunity – almost three quarters believe their business will be better off after Brexit (72%).
Trask says: “Since the Brexit vote, exporters trading with the US have seen the weak pound as a boost for business. Sterling-denominated goods have been on average 15% cheaper since the vote to leave the EU and subsequent GBP/USD exchange rate collapse. However, with President Trump struggling to push through his promised reforms, the dollar has weakened, eroding some of the savings seen by US importers.”