Hemmed in by a weak economy at home, with little prospect of an early return to sustained growth, the answer for many companies looks simple: export. It is not quite as easy as that – and there are pitfalls for the unwary and the inexperienced – but the opportunities are undoubtedly there – not least through state-funded grants.
Manufacturers are at their most optimistic for 14 years about selling goods abroad, according to the CBI employers’ group. Until recently, the weaker pound, down by more than a quarter against other currencies over the course of the financial crisis, had merely caused exports to fall at a slower rate than imports. But in the third quarter, the value of exports started rising for the first time in a year, a sign that British exports can benefit from a pick up in economic activity around the world.
How far export growth can compensate for a flat domestic market is an open question. Another question is how much manufacturing, which still accounts for half of exports in spite of making up only 13 per cent of UK gross domestic product, can achieve – and whether services can also step up to the plate. Financial services’ share of exports had almost trebled over the past 10 years to 12.5 per cent, but the scale of its contribution must be in doubt in the short term.
“There are great opportunities for our industries, particularly creative industries and service industries,” says Vince Clancy, chief executive of Turner & Townsend, a project and business improvement consultancy. “British companies are recognised around the world as being extremely good at the management of projects and the creative side.”
Turner & Townsend employs 2,400 staff, half in the UK and the remainder in 60 offices abroad. Its non-UK revenue has grown by 263 per cent over four years to £84m ($140m). That makes up 40 per cent of the total and Clancy thinks it will be nearer 50 per cent by the end of the year. Its projects range from the Beijing Wheel to Sydney Metro.
It is benefiting from stimulus packages, boosting infrastructure spending in transport, health and education, while the recovery in commodity prices is giving a fillip to its energy and mining businesses. Turner & Townsend is also engaged in Barclays’ integration of Lehman Brothers’ former US operations.
Clancy warns, however, that suddenly switching to overseas expansion will be hard for companies that have not already invested prior to the recession. “It’s quite tough if you haven’t put the infrastructure in place. Whilst there is great opportunity, there is also great risk and a lot of logistical issues involved,” he says. Turner & Townsend has been working overseas for 20 years.
He adds: “The way people do business in each of the regions is very different. The biggest area where companies going overseas get into difficulties is around commercial payment and the quality of clients they contract with.”
UK Trade & Investment (UKTI), the government’s support service, is encouraging companies to export more, arguing that “economic research consistently shows companies that export to any country, in any financial climate, perform better than those that don’t”. Exporters have proved more resilient during the downturn, it says.
The US is the UK’s top export destination, followed by Germany, the Netherlands, Ireland, France, Belgium-Luxembourg, Spain, Italy, Sweden and China. Asia is expected to provide a growing share of opportunities.
Group Rhodes, a Yorkshire-based company with 200 employees, is a machinery manufacturer that has been forced to diversify across a number of sectors in recent years because its core metal-forming business was being eroded by competition from the Pacific Rim. That has paid dividends in the recession: while automotive and heavy ceramics have been particularly hard hit, its presence in the aerospace and oil and gas markets has helped it maintain turnover.
“We can see our way out of recession now and we have a two-year order book. These last two months we have received orders from Saudi Arabia, Thailand and China,” says Mark Ridgway, managing director. Last year, he chaired an Anglo-Indian initiative to improve dialogue between small- and medium-sized enterprises in India and the UK.
“The major problem is this belief that blue-chip companies will do it on their own but that it’s more difficult to create links between the SMEs,” he says. “But there are major opportunities there for SMEs in a lot of developing markets.” He admits there is a “big learning curve” for a lot of them, especially when it comes to hedging currencies and dealing with unfamiliar financial products.
Lee Hopley, head of economic policy at EEF, the manufacturers’ federation, says that with UK markets still depressed, exporting will be “incredibly important” for its members, a third of which export more than half their turnover. She says there is scope to do more, particularly in Asia.
It can be difficult for smaller companies to get the access to contacts they need, she says, but UKTI is a good place to start for market information or more tailored advice and guidance.
The opportunities are there for those with the ambition to seize them.