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October 23, 2012 5:14 pm
Colin Hygate, executive chairman of Green Fuels, makes regular visits to the UK biofuels equipment maker’s operations in the US and China.
Green Fuels’ overseas subsidiaries in Nevada and Hong Kong are critical to its business because the company exports 90 per cent of its production.
Like many midsized companies, Green Fuels originally found overseas markets a daunting prospect. Then Mr Hygate and his son James, the company’s co-founder and chief executive, turned to UK Trade & Investment, the trade promotion agency.
“UKTI has been fundamental to us since we started trading in 2003,” says the elder Mr Hygate. “It has been a tremendous support for us, both for the people here and overseas. But you have to go and use UKTI – it doesn’t come to you.”
Mr Hygate is full of praise for UKTI and the services and advice it offers. The agency sits alongside other government initiatives such as UK Export Finance, whose work includes export insurance, guarantees to help exporters secure finance for working capital, and assistance for overseas buyers purchasing from UK companies.
Business and government leaders are in no doubt that exports are critical to the success of UK companies, including midsized ventures that are well placed to grow.
Indeed, the government announced last year that UKTI would provide export support to about 500 additional midsized businesses each year. But do the state-backed initiatives offer enough?
“There have been a number of good moves by the government to help medium-sized businesses generally and ones that want to become exporters,” says Elizabeth Fells, head of international strategy at the Confederation of British Industry, the business lobbying organisation.
“To a large extent it is too early to tell how effective they will be, but they are definitely going in the right direction.”
She adds: “UK Export Finance has done a good job in improving its products, but there is a way to go to increase awareness.”
Mike Spicer, senior policy adviser at the British Chambers of Commerce, also believes businesses are becoming more aware of government schemes. But there is room for improvement in some areas.
“Attending trade shows abroad is really important for businesses intending to export, because they provide an opportunity to showcase wares in foreign markets and to network,” he says. “UKTI’s Trade Show Access Programme provides funding, but the money available is quite small compared with that in some other countries.”
Mr Spicer also highlights the Overseas Markets Introduction Service, another UKTI initiative that helps UK businesses connect with potential customers. However, he says the BCC has received mixed feedback about the OMIS. “There seems to be a variation in the quality and consistency of the services provided in different countries.
“There is an issue with funding in that it is a flat fee and costs the same for a multinational to use as a one-man shop. We think the pricing structures need to be looked at to make sure it is giving value for money.”
Safetray Products is another business that sees its future primarily in overseas markets. Alison Grieve set up the Edinburgh-based company just three years ago to sell her invention, a food tray that has a retractable handle to stop it toppling over. Already she has landed distribution deals in the Middle East, Australia and North America.
She, too, says government support was important. “We were lucky in that although we aren’t really part of the food and drink sector, we can slip into that category,” she says.
“So in the Middle East there was a food and drink trade mission and a lot of UKTI support, and we were able to jump on that bandwagon. We also used Smart Exporter, a Scottish [trade support] scheme.”
Nevertheless, Ms Grieve says UK companies that want to sell their own inventions abroad often struggle to protect their intellectual property – an issue that government schemes fail to address.
“For all but the largest companies it would be extremely expensive to defend your patent in different markets,” she says. “What many companies do is end up licensing their innovations away at a very early stage.
“That is where the government is missing a trick, because what you get for a licensing deal in the early stages is not what you get if you hold on, start the manufacturing and start to sell – which is what we have done.”
Then there is the issue of red tape. Stuart Watson, the partner responsible for the UK Entrepreneur of the Year programme at Ernst & Young, the professional services firm, says: “Getting approval for exports can be a big problem. I am aware of one example in the food sector where the UK was so slow to approve the exports for a company that a competitor got in there first.
“Government schemes are all very well, but there is no substitute for businesses getting to know people on the ground, shaking hands and networking in new markets.”
Perhaps the biggest issue, however, remains access to finance, both for exporters and their customers. The recent announcement by Vince Cable, UK business secretary, of a new business bank is another effort to ensure the UK’s growing companies have access to cash.
“One of the most important issues for businesses looking to export is cash flow,” says Mr Spicer at the BCC. “Access to working capital is critical, and access to finance more generally has a really strong impact on businesses’ ability to export. The new business bank is a step in the right direction.”
At Green Fuels, Mr Hygate says: “The problem we all have is the ability of our customers to get financing in place. The export finance guarantees offered are so complex that it is extremely difficult to justify getting involved for contracts of less than £5m.
“We are exporting units that cost between £300,000 and £500,000, so they are not cheap, but we can’t use the export guarantees. We insist on full payment before we ship, but some better form of small financing would be a real benefit to exporters.”
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