UK SMEs struggle to cash in on trade deals

The UK government’s new trade deals do not particularly benefit small businesses in Britain, a new survey by the British Chambers of Commerce has found. 

The BCC’s Insights Unit surveyed 4,638 firms, most of them small and medium-sized enterprises (SMEs), and found that 84% of companies with 10 or fewer employees either receive too few export orders to make a difference or rarely engage in international trade.

Bigger companies, which have more resources and well-established supply chains, are doing better: 42% of those with 250 or more employees have seen growth in their export orders. 

William Bain, the head of trade policy at the BCC, called the results “deeply worrying” and noted that the gap between small and big exporters is growing. The potential merits of new trade deals will not be realized unless small delegators receive more support.

He added that a 25% improvement in UK exports could raise long-term GDP growth by 0.6%, but this would only be possible if smaller exporters were able to access new markets.

However, the World Trade Organization recently supported such concerns. The report on the UK’s trade policy states that the country’s export contribution to GDP has returned to its pre-crisis level following the pandemic.

Since Brexit, exports from the UK to the European Union have decreased by almost 30%, while the number of small enterprises that have ceased exporting to the bloc exceeds 16,000.

Government signs trade deals, but small firms still struggle

The UK government has struck a flurry of trade deals with countries such as Australia, Japan, New Zealand, and members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, as well as holding talks with India, while renegotiating its digital trade agreement with the US. 

Despite the dispersal of such deals, the small firms they were intended to empower remain far removed from the debate. Bain, as well as the BCC and other business groups, argue that the government’s assistance is too concentrated and in dire need of modernization. 

Bain said that new trade deals were only as effective as a company’s capacity to apply them, warning that without government investment in trade education, digitisation, and local export advisers, small businesses would remain locked out. The Department for Business and Trade, however, refuted the claim, insisting that it was already taking action.

The government has recently increased the lending limits of UK Export Finance from £60 billion to £80 billion, allowing small exporters to access affordable funding. The department said that encouraging exports was transformative for productivity, job creation, and economic growth. However, insiders revealed that it was making “across-the-board” cuts behind the scenes. 

According to a Financial Times survey, three private sources indicate that DBT reduced its labor by 20%. Many regional advisers who award one-on-one assistance to small firms were included in the reductions. 

Experts call for digital trade solutions and hands-on help

Trade enthusiasts argue that the administration should streamline export processes and transition to digital trade systems. According to Chris Southworth, secretary-general of the International Chamber of Commerce UK, Structural barriers are holding back growth among the smallest businesses. 

First among them is the paper-heavy, bureaucratic red tape that accompanied leaving the EU. Additionally, access to cheap trade credit and information about what red tape to expect in new markets will be crucial. 

Small businesses require digital systems, accurate cost forecasts, and assurance that goods will move through security. The BCC is calling for a “Trade Accelerator” to help us achieve this goal. 

Additional online training for exporters will be included in the proposal, along with a simplified customs system and specific grants for small companies seeking to cross borders for the first time. The group has advised the Chancellor to lay the blueprint in the following week’s Budget or risk losing global growth prospects.

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