SME exporting: the national challenge (Manchester)
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
Stephen Green's speech at The National Challenge: SMEs Export for Growth event in Manchester.
Thank you for that kind introduction, and I’m delighted to be in Manchester today.
I couldn’t have chosen a more impressive setting. I gather that I am standing beneath what was once the flagship of the British Concorde fleet. This plane even had a name - Alpha Charlie - and during its years of service it flew to locations such as Bahrain, Bombay and Kuala Lumpur. It was the first Concorde to land on US soil with commercial passengers, and in December 1985, it took the record for being the fastest airliner in the world, travelling at almost 1,500 mph.
For many people, Concorde is a symbol of the UK as they see it today.
The argument goes that we had a glorious manufacturing past, but we don’t make anything any more.
If there is anyone here today who shares this view, I would urge them to watch the BBC’s excellent series ‘Made in Britain’, that sets out how the UK has changed and adapted over the years. Because the fact is that we produce high value goods and services that are in demand around the world.
We are here today in the first of a series of regional roadshows.
The government, led by Prime Minister David Cameron, has set a national challenge to business to increase our exports. And it is no accident that we have started in Manchester. The north-west has a proud tradition of innovation and a remarkable industrial heritage.
Three-quarters of the nation’s top 100 companies are located here. The north-west is a world leader in nuclear energy…number one in the UK in pharmaceutical…the biggest exporter of chemicals…and a centre of excellence for the aerospace and automotive industries.
It is strong in service industries and has outstanding universities. Its commitment to R&D investment is exemplary, with centres of excellence such as the National Biomanufacturing Centre and Daresbury International Science & Innovation Campus.
And with the BBC’s relocation to Mediacity, it is home to the biggest media hub outside London.
What this means is that the north-west will be at the forefront of delivering on the national challenge.
To set the context, we need only to look back 3 years.
In 2008, we experienced a watershed. The global financial collapse shook the world’s economy to its core. As a banker at the time, I speak from experience when I say that, despite all the warning signs, it was deeply shocking to see the system unravel so quickly. The aftermath of this collapse saw the prevailing financial models discredited. With hindsight, assertions that we had been enjoying a Goldilocks economy - neither too hot nor too cold - seem like pure hubris.
It was time to return to the economic textbooks, where we are told clearly that there are 4 drivers of economic growth. 2 of these are not options in the current climate. We cannot pin our hopes for recovery on private spending fuelled by debt nor on government spending fuelled by debt. The only way in which we can achieve sustainable growth is through trade and investment.
To touch briefly on the latter, FDI has been enormously important to the north-west, creating tens of thousands of jobs - 85,000 since 1985 - and safeguarding many more (135,000).
I’m pleased to note that UK Trade & Investment, the government department that I head, has played its role in helping to land over half of these projects. We face intense international competition for investment and the Government as a whole will continue to work on attracting FDI into the north-west.
However, I am here today to talk about how we can boost UK exports. For the last 4 or 5 decades, we have been running a trade deficit that has acted as a brake on our national economic growth. When I joined government at the start of this year, I did so because I wanted to play my part in turning this around. We need to start paying our way in the 21st century.
But the problem is that not enough UK firms export, and those that do are exporting to markets that are experiencing low growth or even stagnation. We need to raise the number of small and medium-sized firms that export to one in four from one in five. If we do that, we will create tens of thousands of jobs and generate billions for the UK economy.
We have government backing in this all the way.
Less than a month after the Prime Minister launched our national challenge in London, Chancellor George Osborne allocated £45 million to UK Trade & Investment in his Autumn Statement to help small and medium-sized firms to export.
Why the focus on SMEs?
They are the main job creators of the economy. Almost 60% of private sector jobs are created by SMEs.
This national picture is mirrored in the north-west. Over 90% of the quarter of a million businesses in this region are small or medium-sized. They are crucial in the supply chains of the major exporters. They act as innovators in every sector, whether hi-tech or traditional.
And, as the CBI has said, if more SMEs started to export outside the Eurozone, they would add £20bn to the UK economy. When we look at academic research, it clearly shows exporters are on average more resilient and more profitable. They grow faster than firms that confine themselves to the domestic market.
In other words, by acting on exports, we not only address the country’s fragile trade position; we also strengthen the economic backbone of the whole economy. That’s why, of the Chancellor’s £45 million, some £35 million will go to help SMEs by providing more trade advisors and extending existing programmes such as Passport to Export and Gateway to Global Growth.
The remaining £10 million will go to identify 500 medium-sized firms nationwide and provide them with tailored export advice.
The UK is estimated to have 10,000 medium-sized firms, of which less than a quarter export. The majority of those that do so are already receiving support from UKTI. Compared to firms of a similar size in Germany, this is a very small number.
If you are looking for examples of what can be achieved, you have some excellent case studies here.
On the panel earlier, you heard Glenn Cooper, owner of ATG Access Ltd, the market leader in the supply and installation of access control and high security vehicle barriers. His firm has experienced a 300% growth in export sales in the last year alone.
You also heard from Stephen Brennan from Tetrosyl, the largest manufacturer and supplier of car care products in the UK. They sell to 75 countries and, impressively, are the market leader in France.
These north-west companies show what can be achieved when British businesses venture overseas.
The national challenge is not only about getting more companies to export, it is also about reaching out to new markets and looking at new ways to export.
About half of the UK’s exports go to the Eurozone, an area that is experiencing low growth.
This doesn’t mean that there are no opportunities there, as the example of Tetrosyl makes clear. The job of the trade advisors from UK Trade & Investment is to provide tailored advice about the markets that will suit your business best – and these may well be in Europe or the US.
However, in the current climate of European economic uncertainty, it is easy to forget that some parts of the world are experiencing very strong growth. It is in the long-term interests of the UK to build up our trade relationships with these areas.
On Friday, I met a delegation from Vietnam led by Parliament President Nguyen Sinh Hung. It included 60 businessmen working in banking, insurance, infrastructure, energy and construction. They had come to the UK looking for opportunities to do business with UK firms.
Vietnam is one of UKTI’s priority markets. Its economy has grown at 7% per year for the last ten years. They now have a middle class that numbers 20 million with a purchasing power similar to that of Benelux or Australia.
And the UK has more in common with Vietnam than you might realise.
Not only has the BBC just sold them the format of ‘Strictly Come Dancing’, but Vietnam has an estimated 16 million supporters of Manchester United who religiously follow OId Trafford games.
It is not so hard to reach these markets.
Manchester Airport is not only an enterprise zone in its own right, but is also the gateway to high growth markets around the world. Some 270 destinations worldwide can be reached from airports in the north-west.
I have discussed the need to get more firms exporting, and the need to look at new markets, the third element is to look at new ways of exporting.
UKTI is identifying high value opportunities in key growth markets. I would like to see big businesses take along their supply chains when bidding for these contracts, and consortia being formed that can offer a turnkey solution to overseas customers.
In country after country – both developed and emerging – we are seeing governments launch massive programmes – from whole new cities; through transport systems; through the sporting events such as the Rio Olympics and the World Cup; to energy and minerals exploration and development. I would like to see north-west firms banding together to win this business.
In all of this, it’s important to remember that while government plays a vital role, it is a limited role. We can set the legal and regulatory framework, provide advice and support, but in the end, it is the businesses themselves – businesses like those here today - that will make the bottom-line decisions that will determine if our national challenge succeeds or fails.
Because, of course, exporting is not risk free. It’s often unclear where and how to start. Financing is all too often a problem. For a small company facing all the daily challenges of the existing business, tackling the unknown in the overseas markets will often be daunting, to say the least.
That’s why this national challenge is a collective challenge. It is a challenge for government; for individual businesses; and for their supporters, advisors and financiers.
Our sponsors today are PwC and HSBC, and I would like to thank them for their support.
Every SME has a banker, a lawyer and an accountant. Many are members of their local Chambers of Commerce. Many are also members of trade associations. All of these groups are represented here today.
As trusted advisors of SMEs, you play a vital role in encouraging firms to look at the opportunities; in providing the advice and guidance they need; in pointing them in the direction of UKTI and of UK Export Finance.
That’s why your support is vital to the national challenge.
You will have heard Steve Roberts-Mee talk about the new products launched this year by UK Export Finance, formerly known as ECGD. I don’t want to go over ground already covered, but I think it is very important that firms of all sizes can now obtain insurance against the risk of non-payment on export orders and access help to secure the working capital needed to fulfil large orders from overseas.
We are working with banks to spread knowledge of these services. We are also working with the representative bodies of accountants and of lawyers to explore ways of encouraging and helping their members to reach out to SME clients.
A specific example is the guide to International Trade which UKTI has produced in partnership with the Institute of Chartered Accountants in England and Wales. This will help accountants understand how they can support SMEs on export initiatives – and as been sent out to over 2,000 accountancy firms across the country. The Institute has also launched a new Business Advice Service that will offer free advice in more than 2,400 locations across the country.
So what are the next steps? Today is the start of a process, not the culmination.
UKTI’s Chief Executive Nick Baird and I are going around the country to take the national challenge to our economic heartlands.
We will continue in the active dialogue with banks, lawyers and accountants, so that we can keep up the critical momentum of support for SMEs.
We are planning more trade missions to give SMEs the opportunity to explore markets, to establish relationships, to do business. We are also reviewing our support for British companies at key trade fairs.
UK Export Finance is establishing regional presences and working closely with UKTI and with banks to make sure that its products are available to, and understood by, SME exporters.
UKTI is running an ambitious programme of showcasing events around the country, to raise awareness and inform SMEs about a whole series of major infrastructure and development projects around the world.
We are encouraging SMEs to share experience, working with Yell to develop an online service called Open to Export.
We are celebrating success, and I want to quickly mention our Exporting for Growth Prize. Winners will have access to support including expert advice from sponsor companies HSBC and PwC.
Finally: something I repeat as often as possible – to ministerial colleagues, to businesses, to their supporters and advisers, to journalists. This is a marathon, not a sprint. Britain has lived with a weak trade position for fifty years or so. There are no magic wands to be waved. If there were, they would have been waved by now. This is hard work for all concerned. We need to stick at this for ten years or more. And we know there is no alternative. But it is a marathon we can complete – if we keep going.
We have world-class competences in a wide range of sectors, many of them based here in this region. Running a marathon takes determination, training and support. I believe we have the stamina to stay the course and complete it. It is a national challenge – and it will take the energy, creativity, innovation and courage of businesses here in the north-west to succeed.