How to create more “world class” North East SMEs, and what must we do to support them?
Businesses in the North East sometimes regard themselves as being at a disadvantage to competitors boasting closer cultural and logistical ties to the capital. Many are able and ambitious to spread their wings, but often lack the knowledge and contacts to get expansion plans off the ground.
But help and advice is available for those who know where to look.
Tapping into vital support networks that can launch SMEs on a journey of discovery into new markets was the main focus of a round table discussion that brought together an eclectic mix of business leaders at the Hilton
Opening the discussion, Simon Crosby the lead UK Trade and Industry advisor in the North East for Canada, the USA and Mexico, said his overseas customers were often “staggererd” to discover the UK government actively supports SMEs, adding “we don’t really value that in this country.”
The World Trade Organisation recently named UKTI as the ‘best global business support agency for exporters’ and Simon told the gathering: “British businesses are blessed in terms of support that’s available, but we need more companies to come and use us. We’re involved in missionary work all the time. Firstly, to get local businesses to understand the benefits of exporting, and secondly to understand what support is available to them. Because it is a lonely place when you’re exporting for the first time, or you’re entering
a new market.
However, it starts with people. Exporting is like playing the guitar or playing cricket – you’ve got to want to do it. You have to enjoy doing it. And you have to have that drive to start exporting to expand your international trade. We know that the most successful exporters – those who export longest – are those who are driven internally.
So managements have to want to export. When you have external drivers, such as when companies are approached by a potential agent, distributor or customer, we know that is much shorter-lived than having internal talent with drive and passion to become world class.
Simon Dunn, regional international director - North East for Santander was reminded of a story that demonstrated fears about the export market… “One of my old clients, who ran a farming business in Cumbria, had an enquiry for second hand farm equipment over the internet from Nigeria.
He said to me, ‘it’s £80,000 so it’s obviously got to be a no’ and I said ‘tell me about it – what’s the deal?’ He said they’d agreed to buy this piece of kit, but he thought it was fraudulent and that he’d never get his money.
But I told him he could mitigate the risk, most easily, by asking for cash up front. He said he’d never thought of that. And, guess what, he got paid – there was a SWIFT transfer into his account, then a big flatbed truck turned up, put the machine on the back, and drove off!”
Despite this happy ending, Simon Crosby thought it worthwhile to add a cautionary note. He said: “In exporting, common sense can sometimes go out of the window because a lot of businesses are just grateful to get the order and don’t protect themselves. They don’t put things in place to make sure they’re going to be paid – and they’re not as disciplined as in the UK over chasing down payments. You must ask yourself, are you a business selling a product or a service to make money, or are you a business that’s playing the casino.”
Mark Collings, UK director international for Santander, agreed, pointing out how fluctuating currencies can also cause problems. He said: “We’ve seen businesses’ profits wiped out because of the currency market. They’ve been so excited about getting the order, they haven’t managed the risk.”
He offered an anecdote too, one showing the importance of having advisors you trust. He said: “If you ask my wife who she banks with – and this concerns me sometimes – she answers ‘Tony.’ She says it with a big smile on her face! Tony moved banks a while ago and she just blatantly moved with him. So whether it’s banks, tax advice, audit advice or advice about going into new markets, you have to have that relationship; that partnership where it’s about trust on both sides.”
Brian Nicholls, chairman for the evening, picked up on a point made by Andrew Fotheringham, of Wynyard-based Evolution Accountants, who’d said that if you wanted to know what was going on in any particular part of the world, you should find someone from the North East – and they would give you an honest answer. Should there be a register of North Easterners working around the world, asked Brian?
“That’s exactly what we do,” said Simon Crosby, “not finding Geordies, but finding agents and distributors. We’ve 150 offices in 100 countries, so we’ve a presence in virtually every industrialised market. When businesses are looking for partners, that’s one thing we’re very good at. We identify those contacts for North East businesses and give them a tickle, warming them up and getting them interested in a service a business offers.”
Michael Mitten agreed - his company had used the organisation’s OMIS (Overseas Market Introduction Service) quite a lot. He added: “It’s very good if you want to find out about a market, but only as good as the detail in your brief that you give to UKTI. They get someone to go and research for you, and find out whatever you need to know – key contacts, market size, competitors, as much as they can realistically get. It’s a service you pay for, but good value. If you’re going to commit time and cost to go into a market, you should invest in that up front. And it tends to open new doors.”
David Sidlow, of Gateshead-based Palintest, which manufactures water analysis equipment, also praised UKTI. He said: “We’ve been on some trade missions and it does vary depending on the skills of locals. Some are very, very good, some not quite so good. But the UKTI people abroad are excellent. The team in China are fantastic – really enthusiastic locals who know their stuff. It is worthwhile exploring.”
That glowing endorsement prompted Simon Cosby to joke: “I haven’t paid these guys by the way!”
Simon Dunn, regional international director North East for Santander, moved the discussion on, asking those present who else they turned to for advice about trading overseas.
David Sidlow found the North East Chamber of Commerce helpful and cautioned against paying other companies. He said: “I know people who have gone to companies for third party advice and in my opinion have had their eyes ripped out. If you go to the Chamber, they charge you a flat fee – no matter how big the contract – and you still get the same service.”
Simon Crosby agreed: “I don’t think there’s anything better than peer-to-peer learning – it’s incredibly powerful. My question would be, do you feel there are enough opportunities to do this kind of thing, or is today very much a one-off and you haven’t done it for 12 months, or even two years?
Tobias Heintz, MD of Consett-based Pinnacle Engineering, an engineering and manufacturing company supplying the oil and gas market, felt some peer-to-peer networking events were “too random.” He said: “If you have a specific problem, you wouldn’t go to a networking event to find a solution.”
Rob Storey, skills and education manager for North Shields-based AIS Group, which delivers technical insulation, engineering products and services for offshore, said there was a “plethora of representative organisations” but added: “What SMEs really need is to be directed to the right support organisations. As a growing business, that’s not where your focus is and you don’t really have time to attend lots of trade events, so you need someone to point you in the right direction.”
Brian Nicholls wondered if the introduction of New York flights from Newcastle would help open up new markets for ambitious SMEs.
Rob Storey said: “I used to be involved heavily with Newcastle Airport and they are desperate to put that flight on – it’s part of their 10-year growth strategy, but they are going to have to see evidence of that demand. Someone has to pull that together and present a coherent case.”
David Sidlow commented: “You look at Emirates to Dubai and the demand on that has been fantastic. You’d have thought the arguments would stack up for a flight to New York.”
Tony Trapp suggested: “There has to be demand. The Emirates flight is just the same as going to Amsterdam, Paris or Heathrow – all it is, is a flight to a hub. But if you want a direct flight to somewhere there has to be enough demand. I think almost inevitably, in the North East, there isn’t enough demand. There’s not going to be enough people to warrant a daily flight to New York.”
However, Simon Crosby pointed out: "We’re shipping £1bn worth of goods from the region to USA now. It’s our biggest export market after Holland, and we all know why – it’s Europort.”
Brian Nicholls then asked participants about their experiences of knowledge sharing.
Kevin Martin, MD of Hartlepool-based Exwold, a contract chemical processor, said: “As an SME, we try to reflect the behaviour of our larger customers, because they expect us to meet their standards, which is pretty difficult at times. The contra side to that is that they do help us if we’re not meeting their standards – they will hold our hands a little. I’d be interested to hear if anyone else has had similar experiences.”
Tony Trapp returned to the subject of sourcing the right employees. He said: “What’s absolutely critical for this region is to retain the best people – and to attract the best people from elsewhere. It’s just really, really important. You can look at student placements and get some fantastic people, but we need to build up the bulk of really talented people – we have got to attract clever people, and we have got to stop them going elsewhere.”
He said that although Osbit Power tended to recruit only high-achieving engineering graduates, he had on a number of occasions taken on seemingly less promising staff who’d surprised him, including an English literature graduate, and also someone with a background in agricultural engineering but no qualifications. He said: “We took him on against all my better instincts really – and within a couple of years he had qualities which almost all of our degree engineers never had. He’s an absolutely fantastic chap now. So there are loads of good people who can do fantastic things, and I have to admit they don’t all have to have first class honours degrees in mechanical engineering.”
Brian Nicholls commented: “That’s an inspiring story for young people who
perhaps don’t have qualifications but can adapt themselves.”
Changing tack slightly, Rob Storey noted: “We certainly don’t sell ourselves. I’ve been involved in the skills agenda for over 20 years. When I first started we were talking about sleepwalking into this demographic time bomb for skills, and we’re still talking about it. And a lot of companies you speak to ask about workforce, manpower and planning – and lots don’t do it. Most of the good, skilled people in engineering or manufacturing are moving towards retirement.”
Tony Trapp disagreed: “I’ve heard that all my life. I heard that when we set up in the ‘70s. People said exactly the same – ‘they’re all within three or four years of retirement. We’ll have no skilled people.’ And I think we’ve more skilled people in the North East now than we had then. No that’s not true – we don’t have the shipbuilding and we don’t have the steel industries, but, as I say, in the last few years there has still been an upsurge.”
Rob Storey countered: “But we’re not joining up all the dots – we haven’t as many young people. Maybe I’m showing my age, but when I served my engineering apprenticeship many years ago I worked for a company called Noble and Lund in Felling. It’s gone now, but it was a fantastic apprenticeship. They took 20 on every year in their own training centre, and at the end of the four-year apprenticeship they kept 10 on and let 10 go to the SMEs.
You don’t really see a lot of that now. And, I have to disagree slightly with Tony. In terms of working with colleges and universities over the last 10 to 15 years, we need to be doing something more to harness the skills and join it all up, because a lot of young people who go to college now start an engineering apprenticeship and within about six weeks have changed their minds and want to go into something else – that wouldn’t have happened in my day. If you started an apprenticeship you saw it through. We have to find something that enthuses them. We have to get into schools earlier and get them switched on to engineering and manufacturing. Let them see – and their parents and teachers – that it’s not the way it was 30 or 40 years ago. It’s a fantastic career opportunity.
Tony Trapp said: “I’ve had a bit to do with some schools and I always think that I really should be talking to the parents, not the students. We need the parents to raise their aspirations. I remember talking to one group in North Northumberland and I was appalled by their lack of aspiration.”
Simon Dunn explained about Santander’s Breakthrough Talent scheme, which gives graduates the opportunity of hands-on experience in helping companies with projects such as researching export markets or looking at IT systems. He said: “For your specific projects, we bring graduates in and pay half the costs. It’s great to be able to give a graduate experience within an industry, and there’s a huge take-up. After three months you see them in the working environment and see what they’re like. About 65% have been taken on, and you don’t have to be a Santander customer to benefit – it’s one of our CSR (corporate social responsibility) projects.
Tobias Heintz asked Dan Smyth, MD of Gosforth-based online software business Bede Gaming, how he sourced employees, as his company requires people at the cutting edge of IT skills.
Dan, whose firm also has offices in London and Bulgaria, replied: “With some IT roles you don’t want them to have experience because IT changes so quickly. If they’ve been 10 years with the NHS supporting their systems I’m not really interested. I want them at 18 or 19, so long as they are mathematically and computer literate. My biggest challenge is finding those people who have worked with proper software firms following proper software procedures, so that they can come in and train all my apprentices and graduates. You can’t build a business with top class grads unless you have top class trainers and top class senior developers. Right now we have some products that are split between Bulgaria and Newcastle. I advertise roles in both places and whoever comes up first gets the job.
We’ve just taken on four apprentices out of 30 18-year-olds that were interviewed. I’d love to take on everyone with a first-class degree but it’s never going to happen. We focus on first-class computer science grads. Our mission is not to let any leave the region if they want to stay, so we do a lot of work with universities. But the most difficult thing in my business is to attract people with 10 years’ experience across the full software development life cycle.
A lot of people think we have great IT skills in the region. We do have a lot of small IT firms but they don’t work in the same way as your Googles, Mircosofts and Amazons. Obviously we have big IT employers like Sage and, I guess, Scott Logic – and Tombola in Sunderland – but beyond that there are no massive IT employers up here.”
Tony Trapp suggested that shared ownership schemes were one way to attract quality staff, a technique he has used successfully over the years. But he added: “Of course, a shared ownership scheme also encourages people to do it, get some money then go off and compete with you!”
In his closing remarks, Mark Collings thanked BQ and those present for giving Santander the opportunity to sponsor the event. He added: “Someone mentioned earlier about a networking club based on particular themes and that’s something I recommend you do in order to promote the area and sell it as a region, and to attract those skills and those clients. That’s something I’ll take away from this evening specifically for the North East.
Quite a lot of today has been about connecting and talking and listening. I think there’s so much that can be shared about who you go to for advice. I also question whether the North East should be seen as an outpost.
Simon Dunn travelled from Newcastle for a meeting in London recently and got there in three hours – as quickly as some people who live 60 miles away in the South East. So I’d say getting around in this country is quite easy, and I don’t know if maybe you’re putting a barrier in front of yourselves that isn’t there. That would be my observation, especially with technology and being able to use digital to make the world a smaller place – that’s certainly something to think about.
And I don’t see the richness of conversation in other parts of the country that I see here.
Maybe this idea of the North East being an outpost is part of the attraction – you have identity as a business community. I’ve sat on round tables that perhaps don’t have that identity – the accent, culture and market that it is close in its own right. If I were in your shoes, I’d be collectively pulling together to shout about it. In the South East and Home Counties it’s all quite blurred and non-identifiable. So I think there’s something to be said for North East PLC shouting more about itself.
A helping hand in the world of exports
Today’s discussion demonstrated that one of the biggest blocks to trading internationally is a lack of understanding about how it is done and where the opportunities lie. There is no doubt that trading internationally can be daunting; however, working with the right partners the rewards can be transformational to a business. I am really heartened by the energy, optimism and courage of British businesses and their desire to start exporting.
At Santander, as an international bank I like to think that we can help address some of the issues we have discussed here and help businesses take their place on the global stage.
With five million corporate and commercial customers globally, we have the scale, expertise and network internationally to make sure that not only do you get help with financing your export operations but our global network also means we can offer local expertise all over the world.
We believe in listening to our clients and have already offered trade missions and market entry support to over 50 UK businesses.
Working with our network of universities we can also help address the skills issue, helping local businesses tap into talent and access graduates as interns. This allows students and recent graduates to gain valuable industry experience and skills to assist them in the development of both their academic and professional lives.
Alongside this, businesses gain valuable access to some of the most innovative, skilful and creative minds of the future.
Great businesses always have the potential to stretch far beyond their domestic market. They need to work out which countries they should be focusing on with which partners. If you have such aspirations, we’d love to hear from you.
Mark Collings, Director – International Santander UK