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ID Researc Paper
Ice Skates to ArgentinaIoD Member Export Trends 201213
All Part Parliametar Grup r
Trade ad Iestmet
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D Researc Paper Ice Skates t Argetia: ID Member Eprt Treds 201213
3
This paper was written by Alexander Ehmann, Head o Enterprise Policy at the Institute o Directors, with the
support o Andrew Silvester.
The Institute o Directors (IoD) was ounded in 1903 and obtained a Royal Charter in 1906. It is an
independent, non-party political organisation o 35,000 individual members. Its aim is to serve, support,
represent and set standards or directors, to enable them to ull their leadership responsibilities in creating
wealth or the benet o business and society as a whole. The membership is drawn rom right across the
business spectrum, rom media to manuacturing, e-business to the public and voluntary sectors. Members
include CEOs o large corporations as well as entrepreneurial directors o start-up companies.
The APPG on Trade and Investment was ormed in 2012 to research and inorm debate over how best to
support British exporters, particularly Small to Medium Enterprises (SMEs), and encourage oreign direct
investment into the UK. It promotes trade and enables links between Parliamentarians, industry andgovernment in the UK and abroad, and works closely with trade representatives and bodies such as UK Trade
and Investment and UK Export Finance. The Group is chaired by Margot James MP and secretariat services or
the Group are provided by the Institute o Directors.
All research data cited in this paper, unless otherwise stated, is derived rom a recent IoD survey. The IoD
surveyed 1,167 members between 14 and 23 November 2012 using the IoDs Policy Voice panel, a community
o IoD members who participate in monthly surveys on public policy issues. 84% o responses came rom
members whose primary organisation employed up to 249 people, and thereore classied as an SME.
ISBN 978 1904520-83-2
Copyright Institute o Directors
Published by the Institute o Directors
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COPIES AVAILABLE FROM:
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Price: 20.00 where sold
ContentsFrewrd
Margot James MP TBCAlexander Ehmann TBC
Eecutie summar tbc
Iteratial trade te ctet tbc
ID members eprt actiit tbc
Directors propensity to export tbcExports contribution to turnover tbcContribution o services and goods to export activities tbcExport experience tbcExport triggers tbc
ID members markets ad pprtuities tbc
New and established exporters tbcLate payment as a concern or British businesses tbcFocus markets or British businesses tbc
Eprt eperieces tbc
Te -eprters teir str tbc
Germet adice ad supprt tbcUK Trade and Investment tbcUK Export Finance tbc
Cclusi TBC
IoD Export Alphabet
ID members eprt all maer gds ad serices acrss te wrld. Te seer rage prducts
ad serices eprted b ID members is swcased trugut tis reprt, ia ur er w
Eprt Alpabet, sw i te tp pages 732.
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D Researc Paper Ice Skates t Argetia: ID Member Eprt Treds 201213
5
Foreword
ALEXANDER EHMANN,
HEAD OF ENTERPRISE POLICY
AT THE INSTITUTE OF DIRECTORS
Foreword
MARGOT JAMES MP
CHAIR, ALL PARTY PARLIAMENTARY GROUP
ON TRADE AND INVESTMENT
Researching this report, I came across a Hansard transcript o a House o Lords debate
on exports rom 1961. In this ascinating debate, the discussion centred on the UKs
negative balance o trade, the importance o engaging with emergent economies,
the weaknesses o government support or exporters, the uncompetitiveness o
the UKs Export Credit Guarantee scheme and the need to engage businesses in
international trade.
What is startling about this 1960s debate is that, even with the benet o our
decades o discussion and policy development, our export activity still remains well
below par. I am keen to point out that this report rerains rom doing-down the UKs
export credentials. Indeed, there is much to eel optimistic about particularly i the
issues raised in this report are addressed appropriately.
While todays problems are not exactly the same as those o 1961 (indeed many have
arguably worsened) this report recognises the quote those who cannot remember
the past are condemned to repeat it2. What ollows is research rich in reections,
rom a community that is atypical o UK businesses. By atypical I mean that the IoDs
members are unique in one key regard they outperorm the national trend or
involvement in international trade. Indeed, the IoD has a ar higher percentage o
members exporting than any other national business body.
It is not simply the scale o IoD member exports that is so impressive, but also
their international breadth and the sheer range o products and services that are
making their way to every corner o the globe. This report is called Ice Skates to
Argentina with good reason, or our research shows that alongside hair extensions
What does all this mean? It means that we are losing the export race
We live on an island, and the concept of exporting does not come easily to
the people as a whole; nor does the man in the street recognise that we
live or die by our international trade. To overcome this it has s eemed to
many of us that there must be support for a national crusade to excite the
spirit, to revivify and stimulate every facet I repeat, every facet of the
export drive.
The Earl of Bessborough, 22 March 1961 1
MARGOT JAMES MP
CHAIR, ALL PARTY PARLIAMENTARY GROUP
ON TRADE AND INVESTMENT1 HL Hansard, Vol 2w29 Cols 1153-218, 22 March 19612 George Santayana (1863-1952) rom Lie o Reason I
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to Zimbabwe, prosthetic limbs to Malaysia, caravans to Australia and woodwind
instruments to Thailand (to name a ew), IoD members are exporting every type o
good and service to every nation imaginable.
What this means is that the issues set out in this report are rom an extremely well-
inormed community. Indeed, the research in this report has consciously sought
out the views o the IoDs non-exporters as a counterweight to the extensive export
experience o most members. This report provides the latest contribution to the public
policy debate on the motivations, aspirations, barriers and market penetration o
exporters, non-exporters and ex-exporters.
Executive summary
The Institute o Directors conducted a wide-ranging survey o members in November
2012, asking them to what extent they were involved in international trade3. The results
o that research makes up the majority o this report, giving an invaluable insight into
the state o Britains businesses on the international stage. Where appropriate, gures
are contrasted with a similar survey undertaken in 20104.
57% o IoD members export, ar outstripping the national average or all UK
businesses. This has grown rom 53% in 2010.
For 50% o those members, export activity counts or less than 30% o overall
turnover.
54% o exporting members export services, 28% goods, and 17% both. Overall,
thereore, 71% o IoD exporters trade services overseas, and 45% trade goods.
Exporters
Since 2010, Asia has taken over rom the United States as IoD members second
largest export destination and IoD members view Asia as the most likely region to
deliver growth in their export activity over the next ve years. Though the EU retains
top spot as the most popular export market, there has been a signicant all in the
number o exporters anticipating growth in trade with the EU over the next ve
years.
However, there is a very strong correlation between the experience a member has
o exporting and their penetration o emerging markets. Those members new to
exporting continue to look rst towards the European Union and North America,
rather than the perceived riskier propositions represented by emerging markets.
IoD exporters have made signicant strides into a number o emerging markets
since 2010. Most o these are in South East Asia, Eastern Europe and Arica. In light
o the inconsistent economic growth and political instability o many o the N-11
nations, we propose the IoD 10, a grouping o countries which may provide a more
cohesive and potentially protable target list or UK businesses5.
However, IoD members as a whole still export more to Spain than China, Belgium
than India.
Factors reerenced as obstacles to urther export activity were varied, but the
challenges o engaging with potential customers, nding the time to devote to
business overseas, and the diculties o identiying urther suitable business partners
were most oten cited.
Non-exporters
Interestingly, 12% o those questioned had previously exported but had not exported
within the past year. A variety o actors contributed to the cessation o their export
activity, but many cited their organisation being too small and the diculty o nding
3 Institute o Directors survey o 1,167 Policy Voice panel
members, conducted in November 2012. A demographic
breakdown o those surveyed can be ound at the end o
this report. All gures cited in the executive summary, and
those gures cited in the ensuing report, are derived rom
this survey unless otherwise stated.4 Institute o Directors survey o 1,006 Policy Voice panel
members, conducted in November 2010.5 The N-11 or Next Eleven is a term used to describe
eleven markets expected to drive economic growth this
century, and was coined by Goldman Sachs economist Jim
ONeill in 2005. They are: Bangladesh, Egypt, Indonesia,
Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea,
Turkey, and Vietnam.
ALEXANDER EHMANN,
HEAD OF ENTERPRISE POLICY,
INSTITUTE OF DIRECTORS
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20000
100000
0
-10000
-20000
-30000
-40000
the time to devote to business overseas.
71% o non-exporters have no plans to begin exporting at any point in the uture.
86% suggested they would certainly not be doing so within the next year.
48% o non-exporting micro businesses cited their size as a barrier to export
compared with 38% or SMEs overall and 20% or the largest rms. In international
trade, size matters.
Support and advice
Those who do not currently export are more likely to consult UK Trade and
Investment (UKTI), and private sector providers such as the IoD, or advice on
exporting, as opposed to those who are already engaged in exporting. Established
exporters are ar more likely to believe that existing business contacts provide the
best support and advice as they grow their export activity.
67% o exporters are aware o the services provided by UKTI. Just over hal o those
had used UKTI, and o those 58% regarded UKTI as ofering a good or very good
service. This compares very avourably with other government support bodies.
Awareness and utilisation o UK Export Finance, the UKs Export Credit Guarantee
Scheme, is low. Feedback on the service provided was mixed.
International trade the context
Between the end o World War II and the mid-1990s, despite the end o the British
Empire, Britains balance o trade held more or less in a neutral state, with only
dramatic shocks the 1972/3 oil crisis and the global downturn in the late 1980s
temporary destabilising the trade balance signicantly. Since the mid-1990s, however,
a downward trend has set in. The Prime Minister, David Cameron, is right to say that
Britain is in a global race a race in which, currently, Britain is losing ground6. While
the eyes o the world were on London or last years Olympic and Paralympic Games,
Britains trade decit the monetary gap between imports and exports hit a record
4.4bn in August 2012.
In around 30 years, Britain has shited rom a neutral balance o trade to a net
importer and by some margin. In the words o The Economist, the country that
once boasted 40% o the global goods trade has become an export pygmy8. Such a
worrying trend was lost in the 1990s and 2000s whilst prosperity and growth seemed
immovable. However, in the present economic climate such weaknesses can no longer
go unnoticed. Being stark about matters, the UK economy now more closely resembles
the spluttering economies o Italy, Spain and France, in terms o international trade
at least, rather than the much healthier gures o other Northern European countries
(graph 2).
Graph 1: UK balance o trade 7
6 David Cameron, Speech to Conservative Party Autumn
Conerence 2012, 10 October 20127 Oce o National Statistics8The Economist, Better Out Than In, 9 February 2013
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14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
-2,000
-4,000
-6,000BalanceofTrade,
Jan13(GBPmillion)
Germ
any
Netherl
ands
Irelan
d
Switz
erlan
d
Swed
en
Denm
ark
Cyprus
Italy UK
Spain
Fran
ce
25,000
20,000
15,000
10,000
5,000
0
-5,000
-10,000
-15,000
-20,000
-25,000
-30,000 20 11 Q2 2 01 1 Q3 2 01 1 Q4 20 12 Q1 20 12 Q2 2 01 2 Q3 2 01 2 Q4
m
Trade in goods
Trade in services
Balance of trade
Graph 2: January 2013 balance o trade data or selected
European economies9
Table 1: Britains top 10 export markets or goods, 1960-201112
Table 2: Top Bilateral Trade
Pairs 2009
Table 3: Top Bilateral Trade
Pairs 2030
Graph 3: UK balance o trade in goods andservices
The overall balance o trade, o course, tells only hal the story. Britain remains a world
leader in services, most obviously nancial services. For some years, the UK has run a
substantial trade surplus with regards to services; in 2012, upwards o 70bn10. This is
more than counter-balanced, however, by a 92bn trade decit in goods, as shown in
graph 311.
Key markets
Britains key markets or goods, as shown in table 1, have actually shited closer to
home throughout the latter hal o the 20th century and the beginning o the 21st.
Whilst in 1960 six o Britains top ten export markets or goods were beyond the
European continent (ve o which were in the Commonwealth), that number had
allen to two by 1980 and nally just the United States in 2011. Much o the worlds
growth over the past decades has been beyond Europes borders, just as British goods
exporters have ocussed their eforts ever more on European opportunities.
It is expected that by 2050, two-thirds o the worlds thirty largest economies will be
those currently classied as emerging13. The consumption implications o such growth
growth that could mean nearly two-thirds o the global population would be classied
as middle class by 2030 are enormous and present an unprecedented opportunity
or rms across the world. It is an opportunity, however, that the UK is expected to
miss. A PricewaterhouseCoopers report in 2011 predicted the top 30 bilateral reight
partnerships in 2030; the UK eatured in six o the actual top 25 routes in 2009, with
three in the top 10. This is expected, as shown below, to all to just three in total by 2030,
as we can see in tables 2 and 3 14.
1
2
3
4
5
6
7
8
9
10
12
20
21
China
China
Japan
China
Germany
Germany
China
United Kingdom
Japan
Netherlands
France
Belgium
Ireland
United States
Japan
United States
Korea
United States
United Kingdom
Germany
United States
Korea
United Kingdom
United Kingdom
United Kingdom
United Kingdom
1
2
3
4
5
6
7
8
9
10
12
20
21
China
China
China
China
China
Japan
China
China
Germany
China
Germany
United Kingdom
China
United States
Japan
Korea
India
Germany
United States
Singapore
Indonesia
United States
Malaysia
United Kingdom
United States
United Kingdom
1960
USA
Australia
Canada
Germany
South Africa
India
Sweden
Netherlands
New Zealand
Ireland
1980
Germany
USA
Netherlands
France
Ireland
Belgium and
Luxembourg
Italy
Sweden
Switzerland
Nigeria
1970
USA
Germany
Ireland
Netherlands
Sweden
Australia
France
South Africa
Belgium and
Luxembourg
Canada
1990
Germany
USA
France
Netherlands
Belgium and
Luxembourg
Italy
Ireland
Spain
Sweden
Japan
2000
USA
Germany
France
Netherlands
Ireland
Belgium
Italy
Spain
Sweden
Japan
2011
Germany
USA
Netherlands
France
Switzerland
Ireland
Belgium
Italy
Spain
Sweden
9 Trading Economics10 Oce o National Statistics, Publication Tables UK Trade,
January 2013, 12 March 201311 Ibid
12 International Monetary Fund, Direction o Trade Statistics13 Graeme Leach, Big Picture, (Summer 2012) 714 PricewaterhouseCoopers, Future o world trade: Top 25
sea and air reight routes in 2030 (March 2011)
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Constituency
Istitute Directrs
Britis Cambers Cmmerce
Federati Small Busiesses
UK Aerage
% o exporters
57%
32%
21%
31%
This reects a wider problem. As a country, we still export more to Belgium than we
do to China, the worlds second largest economy. More to Spain than to the 1.2 billion
people o India. These growth economies surely hold the key to the success o UK
exporters, but British businesses seem reluctant to expand beyond traditional,
mature markets.
Britains global brand
Britains worldwide brand has never been stronger. The successul Olympic and
Paralympic Games, the global coverage o the Queens Diamond Jubilee, and the Royal
Wedding have burnished a reputation or quality that has grown not just of the back
o Britains leading rms, such as Rolls Royce and BAE, but on the high quality o goods
and services delivered by British exporters across the sectoral spectrum.
I British businesses continue to lag behind oreign competitors in capitalising on our
increasingly connected world, the results could well be disastrous. Paul Walsh, Chie
Executive Ocer o Diageo, put it bluntly in saying that parochialism and insularity is a
recipe or contraction16. Britain must export to grow. In conjunction with the All Party
Parliamentary Group or Trade and Investment, the IoD hopes to illuminate Britains
position on the international stage. Our joint analysis o data collected rom IoD members
will provide invaluable insight into the mindset o British exporters and non-exporters
alike, illuminating the barriers and the opportunities or British rms abroad.
Export activity amongstIoD membersDIRECToRS PRoPEnSITy To ExPoRT
National business involvement in export actitivity is considered to be as high as
31%17. Amongst the IoDs 35,000-strong membership, export activity takes place in
57% o member businesses18. By comparison other national business organisations
have considerably less export-oriented memberships, with the Federation o Small
Businesses counting 21% o its members as exporters and 32% amongst the
membership o the British Chambers o Commerce19. Table 4 (below) sets out these
diferences and illustrates the extraordinarily high proportion o IoD members involved
in international trade.
The levels o export activity undertaken by IoD members has also been careully tracked
through research over time and the ndings below demonstrate a consistent upward
trend in export activity since 2005 (table 5).
Anecdote suggests that the larger a business the more likely it is be involved in export
activity. As table 6 shows, the research conducted by the IoD supports this theory,
with an 8% higher gure or exporters amongst micro enterprises than amongst sole
traders and a urther 5% increase rom micro to small-sized businesses. The pattern
continues with a rise o 14% rom small to medium-sized businesses. The only decrease
in exporting we see through the spectrum o business sizes is amongst the very largest,
who are 4% down on their medium-sized counterparts, who are in turn the most likely
size o business to export.
Table 4: Percentage o various constituencies engaged inexport activity
Table 5: Percentage o IoD members engaged in export
activity by year
2005
41%20
2010
47%21
2011
53%22
2012
57%
15 Ibid16 Speech, 4th July 2012, to a meeting o the APPG or
Trade and Investment
17 UK Trade and Investment, Exporting or Growth: Your
Export Opportunity, 201018 IoD Policy Voice Research (1,162 respondents): December
2012: Has your organisation exported goods or services
internationally within the last 12 months?19 British Chambers o Commerce, BCC: Boost exports
urther by improving businesses language skills and
international connections (21 April 2012) Accessed
April 4, 2013 at http://www.britishchambers.org.uk/
press-oce/press-releases/bcc-boost-exports-urther-by-
improving-businesses-language-skills-and-international-
connections.html#.UV1IlKI3txt; Federation o Small
Businesses, FSB wants tailored support or small rms
to encourage rst time exporters (March 17, 2013)
Accessed April 4, 2013 at http://www.sb.org.uk/News
aspx?loc=pressroom&rec=799220 IoD Exporters in 2004-2005; IoD Policy Paper21 IoD Policy Voice Research 2010: Has your organisation
exported goods or services internationally within the last
12 months?22 IoD Policy Voice Research 2011: Has your organisation
exported goods or services internationally within the last
12 months?
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Change in export contribution
Icreased sigicatl
Icreased sligtl
Remaied te same
Decreased sligtl
Decreased sigicatl
orgaisati will stp eprtig
Dt kw
% o IoD exporters
20%
39%
31%
6%
2%
1%
2%
Percentage o Turnover
1-5%
6-10%
11-15%
16-20%
21-30%
31-40%
41-50%
51-60%
61-70%
71-80%
81-90%
91-100%
Dt kw
% o IoD exporters
19%
9%
6%
8%
8%
7%
6%
6%
7%
8%
7%
8%
1%
Grouped %
50%
49%
1%
Change in export contribution
Icreased sigicatl
Icreased sligtl
Remaied te same
Decreased sligtl
Decreased sigicatl
Dt kw
% o IoD exporters
18%
31%
35%
10%
5%
2%
Table 6: Export activity by size o enterprise/number o employees (EE)
Eprter
n Eprter
Dt kw
All
57%
43%
1%
SoleTraders
(0 EE)
41%
59%
0%
Micro(1-10
EE)
48%
52%
0%
Small
(1-49
EE)
53%
46%
1%
Medium
(50-249
EE)
67%
33%
0%
Small &
Medium-sized
(1-249 EE)
55%
43%
0%
Large
(250>
EE)
63%
36%
1%
ExPoRT ConTRIBUTIon To BUSInESS TURnovER
IoD members are exporters o all sizes (in relation to their business turnover). Over a
third (36%) o IoD members engaged in international trade state that exports account
or more than hal o their businesss turnover.
Table 7 shows that the largest single research banding is the 19% o IoD members who
export at the most modest levels (1-5% o turnover). The same table goes onto show
(under the heading grouped percentage) that a ull hal o IoD members export at
levels between 1-30% o their businesss turnover.
ConTRIBUTIon oF SERvICES AnD GooDS To ExPoRT ACTIvITIES
When exports are spoken o in the media and in broad political terms, too oten the
sheer tangibility o a physical product leads commentators to talk in terms o goods
rather than services. The IoD research shows that amongst the 57% o members that
export the reality is ar more nuanced.
Table 10 shows that the majority o IoD exporters are exclusively engaged in the export
o services (54%). I one takes into consideration the members that are exporting both
goods and services, this means that 71% o exporting members have some export
activity involving the trade o services.
Having looked backwards (12 months) at the export activity contribution towards
business turnover o member exporters, the IoD also asked those engaged in exporting
to consider a orward look into 2013.
The pattern was similar, in that members expected to see commensurate increases
in the contribution o exports to their organisations turnovers. Where 49% said that
in the past 12 months they had see n the contribution o exports increase within their
businesses, as table 9 illustrates 59% expected to see an increase in the contribution
in the coming 12 months. This 10% increase in predicted contribution should be
tempered by the act that the most signicant increase came rom businesses stating
they were likely to see slight increases in the contribution o exports. Nonetheless,
the gures demonstrate the growing importance o exporting to the balance sheet o
the UKs exporters and the expectation that this will continue into 2013. This mirrors
other IoD polling, which has suggested that business owners are mildly more optimistic
about 2013 than 201223.
The IoDs research went on to ask how the contribution o export activity had altered
within the last 12 months (table 8). What was clear rom these ndings was that the
export contribution to turnover had increased. What is unclear rom the research was the
degree to which this was accounted or by greater levels o export activity as opposed to a
contraction in the turnover accounted or rom UK trading. Member eedback suggested
that it was a little o both.
Nonetheless, 49% o exporting IoD members said that the contribution to turnover
that exports accounted or had increased. Only 15% had seen the proportion o export
revenues relative to turnover decrease in the 12 month period beore the research was
conducted. Whether driven by contraction o domestic demand or proactive export
expansion, IoD exporters are seeing a clear upward trend regarding the extent to which
exporting was contributing to their turnover.
Table 7: Exporters: percentage o turnover accounted or by exports
As the UK market has
slightly contracted, we
have continued to grow
the company by seeking
out opportunities urther
afeld, especially in Asia.
IoD member
Table 8: Exporters: past 12 month change in exportcontribution to turnover
Table 9: Exporters: uture 12 month change in export
contribution to turnover
23 Survey o 1,369 IoD members conducted between 12
and 20 December 2012
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Less than a year
1 year
2 years
3 years
4 years
5 years
610 years
1120 years
2130 years
More than 30 years
For how long have you been exporting?
5%
5%
5%
4%
3%
7%
22%21%
11%
16%
28% o exporting IoD members are exclusively engaged in the international trade o
goods. Taking into consideration those involved in goods alongside service exports, the
total percentage o IoD exporters involved in goods exporting is 45%.
This research shows the healthy contribution o both goods and services to the UKs
export activity, but also reects the relative strength o service sectors in the economy
as a whole and corresponding dominance in trade conducted by IoD members.
Table 10: Exporters: percentage trading in goods and/or services
Export type
Gds
Serices
Gds ad Serices
Dt kw
% o exporters
28%
54%
17%
0%
ExPoRT ExPERIEnCE: LEnGTh oF TIME SInCE FIRST ExPoRTInG
It would be easy to imagine that in some way the increase in export activitiy that was
reerred to earlier in this report was a relatively modern phenomenon. The gures
quoted earlier show a signicant increase in the current propensity to export amongst
IoD members when compared with 2005 or even 2010 (see table 5).
In broad terms the political and business narrative is now very clearly geared toward
international trade in a way it wasnt even ve years ago. Despite this, member research
shows that many o those who currently export have been doing so or some time.
As graph 4 shows, 29% o IoD exporters began doing so within the last 5 years.
However, an outright majority o members (70%) exporting have been doing so or 6
or more years. Indeed, there are almost as many members who have been exporting or
over 20 years (27%) as there are that began exporting within the last 5 years.
Graph 4: Exporters: period o time since rst exporting
ExPoRT TRIGGERS: REASonS FoR BEGInnInG ExPoRTInG
Part o understanding what makes businesses export is an understanding o what
triggered those businesses that do export, to do so. One has to be careul o over-
interpretting the experiences o established exporters, because the views o those that
do not presently export need to be read alongside such ndings to create a broader
public policy understanding (this report will do so later).
Despite this, the ndings are nonetheless interesting and can be seen in table 11.
The top our reasons or e ntering export trade are largely internally-driven strategic
decisions. Either the business concerned recognises that the type o business they do
necessitates export activity; they have made contacts/customers abroad; or they have
developed plans or strategies to realise potential and/or grow their business overseas.
All these our triggers were noted by at least hal o the IoDs exporters, which present a
relatively homogenous picture o an enlightened, strategic direction that had led many
to international trade.
The next most requently supported reasons are what can broadly be characterised as
tactical decisions. These triggers are a mixture o internally-driven entry to the export
market and externally-driven actors. Whether initiatied by an unsolicited enquiry
rom overseas, recognition that the UK market was proving insucient or that the
export activity was triggered by an overseas parent company; these exporters ound
themselves noting the value o export activity without necessarily having given ull
strategic consideration to the position o exporting in their businesses.
As one progresses down the list o tactical actors, they arguably become less
considered than those outlined above. These externally initiated tactical opportunities
include the ease o trading abroad, weakness o Sterling and the inheritance o export
activity rom elsewhere.
Finally, the IoD has chosen to pay particular attention to the two options available
to members that were very clearly public policy interventions that were created to
stimulate export activity. Whether UK government initiated or via private sector/oreign
governments etc, the provision o external advice and advertising/marketing/trade
shows are interventions in the marketplace that seek to stimulate export activity that
would otherwise be unlikely to take place. What is interesting is that the most oten
cited o these two options (advertising/marketing/trade shows) was only mentioned by
10% o exporters as triggering their export activity. Clearly, this doesnt mean that such
interventions are not valuable in assisting those that already export to do more, but
the modest support o only one in ten exporters or these public policy interventions as
their initial export trigger is worth remarking on. Despite this limited efect, it should be
noted that whilst this report has not published in ull IoD survey data rom 2010 asking
these same questions, as most elds received very similar answers in both versions
(2010 and 2012), the advertising/marketing/trade show trigger actor did show
signicant diference across the two studies, with only 6% citing as a actor in 2010. It
should also be noted that some members explicitly suggested that Government should
promote better exposure o UK business to overseas companies by sponsoring trade
missions o smaller companies. It will be interesting to monitor the results o recent
additional investment in the Tradeshow Access Program24.
Our initial exporting
was opportunistic,
but we now have an
international strategy
in place or 2013 and
onwards.
IoD member
24 Business Matters Magazine, Government invests 13M
in SMEs to help double UK exports by 2020, September
28 2012
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Export Market
Eurpe (EU)
Asia
nrt America
Middle East (icludig Turke)
Eurpe (n-EU)
Australia ad oceaia
Arica
Sut America
Cetral America ad Caribbea
Dt kw
% o IoDexporters (2010)
84%
39%
45%
38%
36%
27%
24%
17%
12%
0%
% o IoDexporters (2012)
82%
47%
46%
44%
41%
30%
28%
20%
15%
0%
Dierence
20102012)
-2%
+8%
+1%
+6%
+5%
+3%
+4%
+3%
+3%
0
Table 11: Exporters: reasons or beginning export activity
IoD members export activity markets and opportunitiesIoD exporters export to every corner o the world. This section o the report benets
rom some very useul comparisons that are drawn between the 2012 data and
previously unpublished IoD research rom 2010. Both datasets will be used in this
section, but in weaving the past together with the present it seems most appropriate to
look back at member growth expectations on export markets and compare those with
the current state o play.
Table 12: Exporters: expected 2011-2016 geographical marketexpectations compared with 2012 geographical market activity
Table 13: Exporters: engagement in geographical markets
Export Market
Eurpe (EU)
Asia
nrt America
Middle East(icludig Turke)
Eurpe (n-EU)
Australiaad oceaia
Arica
Sut America
Cetral Americaad Caribbea
Dt kw
Markets in which members
expected to see growth inexports over 20112016
(2010)
58% (1)
39% (2)
33% (4)
34% (3)
21% (5)
14% (8)
16% (6)
15% (7)
3% (9)
0%
% o IoD
exporters(2012)
82% (1)
47% (2)
46% (3)
44% (4)
41% (5)
30% (6)
28% (7)
20% (8)
15% (9)
0%
Dierence in rank
between 2010
prediction and2012 reality
0
0
+1
-1
0
+2
-1
-1
0
n/A
Why did you begin exporting?
Te tpe busiess we d
Ctacts/Custmers abrad
Realisati market ptetial abrad t
icrease prts/turer
Part a erall grwt strateg
Uslicited equiries rm erseas
UK market isuciet/reduced grwt
ptetial i UK markets
oerseas paret cmpa/ces
Adertisig/marketig erseas/trade swshistrical reass/bugt cmpa tat
alread eprted
Easier t trade abrad/less legislati
Weakess Sterlig
oter (please speci)
Eteral adice
Dt kw
% o IoD exporters
61%
55%
54%
51%
30%
27%
11%
10%7%
5%
3%
2%
1%
1%
Grouping
Strategic:
Iteral Factrs
Tactical:
Iteral / Eteral
Factrs
Plic IteretiTactical:
Eteral Factrs
Plic Itereti
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0 210
Institute o Directors members export to every country in the world. These maps, which contrast export activity
in 2010 and 2012, help to visualise both the scale and nature o Britains international trade as well as giving
some indication o changes that have occurred over the past 2 years.
Heatmap:2010
Heatmap:2012
30%ormore
20to29.9
9%
10to19.9
9%
5to9.9
9%
1to4.9
9%
below1%
30%ormore
20to29.99%
10to19.9
9%
5to9.99%
1to4.99%
below1%
O is rOil and gas machinery and sotwareN is rNoise control products
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Table 14: Exporters: 2011-2016 geographical marketexpectations compared with 2013-2018
What is clear rom the data is that members were broadly correct in oreseeing (at least
at this early stage into the ve year window suggests) the recalibration taking place in
the export markets being targeted by UK businesses. It might have seemed somewhat
surprising that IoD members in 2010 elt that the EU would prove to be largest growth
market or exports in spite o great uncertainty within the Eurozone (see table 12). That
said, while there has been movement away rom established markets such as the EU
and North America, towards the Middle East and Asia, the rank order o present export
engagement as listed in table 12 shows very little divergence rom what was expected
by IoD members in 2010. North America and Australia/Oceania have perormed
somewhat more strongly than expected and Arica, South America and the Middle East
somewhat less well than expected.
However, looking beyond the rank order noted above, table 13 shows in a more
granular way that some signicant shits have taken place within the last two years
even i they have not yet undamentally reordered the hierarchy o IoD member
export markets. There has been an 8 point increase in the percentage o IoD members
exporting to Asian markets, and similarly the Middle East and non-EU markets o
Europe have seen 6 and 5 point increases respectively. Indeed, growth in export
activity in all geographical regions o the world has increased with the exception o the
EU, which has seen a modest (but against the trend) decrease o 2% in IoD exporters
engaged in its markets.
Table 14 shows some very proound diferences in outlook rom the IoDs exporting
community when comparing their views in 2012 with their outlook in 2010. We have
already noted that movement in the distribution o export activity is taking place and
by signicant margins, yet the overall world order o export markets has remained
relatively stable (rom a UK exports perspective).
Our survey however suggests that the pace o change is set to increase. Members
predict that unlike in 2010, Asia will move beyond Europe (EU) as the market likely to
produce the most growth in their UK export activity. Europe maintains second rank, but
interestingly we see North America improve rom 4th to 3rd on the back o diminishing
expectations in the Middle East. Further down the hierarchy we see members
expecting higher growth in South America than Arica, though both are on an
upward trajectory.
As with the data we have already analysed, showing a movement away rom European
(EU) markets the expected trend is or a real reduction in export growth in EU markets
over the next ve years. Indeed, the EU is the only export region to receive a double
gure percentage point reduction in export growth expectations by comparison with
member expectations in 2010.
The export tectonic plates are clearly shiting and in a way that seems to show that
export businesses recognise that the biggest potential is to be ound in emerging
markets, and we will explore in greater detail growth in those markets later.
nEW AnD ESTABLIShED ExPoRTERS
The current exporting mantra is or businesses to look arther aeld than perhaps they
would naturally consider when beginning their export activity. Indeed the member
research shows that businesses believe that the growth in their export activities will
increasingly be driven by markets such as Asia, South America and Arica. However, the
IoD has urged caution in attempts to make rst-time exporters jump into these more
complicated export environments in the hope o greater returns. This report does not
have the space to expand on the varied challenges o diferent markets and whether
the potential rewards outweigh these. However, the research does demonstrate that
there appears to be a clear correlation between export activity in these higher growth
markets and the amount o years that a business has been exporting, as can be seen
in graphs 5 8. Broadly, more experienced exporters are more likely to operate in
emergent markets than new exporters.
The rst step as an exporter is oten the most daunting. As a result, most new
exporters rst market or goods and services beyond the UK is just over the Channel
in the European Union (see graph 5). More than two thirds o new exporters trade in
Europe; which is by ar and away the most popular destination or these new entrants.
There is only a weak correlation between market penetration and export experience or
members operating in mature markets, such as the EU and North America (see graph
90%
100%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Percentagethereof
For how long have you been exporting?
1 year 23 years 4 5 years 610years
1120years
2130years
More than30 years
Graph 5: % o exporters engaged in EU by length o timeexporting
Export Market
Eurpe (EU)
Asia
nrt America
Middle East(icludig Turke)
Eurpe (n-EU)
Australiaad oceaia
Arica
Sut America
Cetral Americaad Caribbea
Dt kw
Markets in which
members expected to
see growth in exportsover 20112016 (2010)
58% (1)
39% (2)
33% (4)
34% (3)
21% (5)
14% (8)
16% (6)
15% (7)
3% (9)
0%
Markets in which
members expected to
see growth in exportsover 2013-2018 (2012)
43% (2)
50% (1)
33% (3)
30% (4)
22% (5)
13% (8)
19% (7)
20% (6)
3% (9)
3%
Dierence
in % and
(rank)(20102012)
-15 (-1)
+11 (+1)
0 (+1)
-4 (-1)
+1 (0)
-1 (0)
+3 (-1)
+5 (+1)
0 (0)
+3
Decreased activity in EU
markets will continue to
drag our overall exports
down, but were growing
in other export markets.
Well be continuing
the shit away rom
the EU in the next 12
months and see/plan or
signifcant export growth
in 1224 months.
IoD member
Q is rQuartz componentsP is rPaving stones
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4 25
6). Blessed with a customs union in one market, and a common language and (to an
extent) common law in the other, these markets are popular or exporters new and old.
By marked contrast, smaller rms are ar less likely to be trading with the N-11 and
BRICS nations; less than a quarter o rst-time exporters engage with Asian markets,
and only 15% with the Middle East25 (see graphs 7 and 8). There is a very signicant
correlation between the length o time an organisation has been exporting and the
likelihood o it being involved in emerging markets. The additional complications
that come rom trading with these markets (one o which, ear o late payment, we
discuss in detail below) seem to be an obstacle or the smallest rms, perhaps as much
psychologically as in actuality, but as rms become more condent and successul as
exporters more generally they do expand to these markets there are more long-term
exporters in Asia than in North America, or instance. Whereas the additional security
o mature markets appeals to smaller rms, it is the vast rewards o emerging markets
that most excites and seems to be within the capabilities o - those with the most
long-standing international outlooks.
100%
80%
60%
40%
20%
0%
Percentagethereor
For how long have you been exporting?
< 1 y ea r 2 3 y ea rs 4 5 ye ar s 6 10years
1120years
2130years
More than30 years
100%
80%
60%
40%
20%
0%
Percentage
thereor
For how long have you been exporting?
< 1 y ea r 2 3 y ea rs 4 5 ye ar s 6 10years
1120years
2130years
More than30 years
100%
80%
60%
40%
20%
0%
Percentagethereor
For how long have you been exporting?
< 1 y ea r 2 3 y ea rs 4 5 ye ar s 6 10years
1120years
2130years
More than30 years
Graph 6: % o exporters engaged in North America by length
o time exporting
Graph 7: % o exporters engaged in Asia by length otime exporting
Graph 8: % o exporters engaged in Middle East by length otime exporting
LATE PAyMEnT AS A ConCERn FoR BRITISh BUSInESSES
Being paid in ull and on time is a crucial part o the day-to-day operations o any
business. Though there remains work to do on the subject, the Late Payment Act
o 1998 and guidance developed since has gone a long way to improving business
condence that they will be paid on time when engaging in domestic transactions.
IoD members told us that late payment in some emerging markets is a real concern.
This is particularly likely to be a problem or the newest exporters and small rms. Large
rms can to an extent absorb late payment o invoices in emerging markets, but or
a rm considering exporting or the rst time, the ear o late or non-payment could
dissuade activity abroad.
The World Banks annual Doing Business report suggests that many o the worlds
astest growing markets are ailing to put the legal rameworks in place to ensure
prompt payment. Nigeria and Pakistan markets with nearly 400m potential
consumers rank 98th and 155th respectively26. India, with a population o over a
billion people and predicted growth o more than 6% in 2013, languishes in last but
one place, with only Timor-Leste considered to have less efective mechanisms in place
or ensuring prompt payment and punishing those who ail to do so27. This could,
perhaps, suggest why new exporters are less likely to trade with emerging markets
as opposed to those mature markets which typically have developed stronger legal
rameworks in these areas. For instance, one IoD member said Middle East debt takes
approximately 90 days whereas the UK debt is approximately 30 days; we have very
little legal recourse.
30% o exporting IoD members cite their concern about securing payment as a
disincentive to expanded export activity. The EU is attempting to remedy problems
most apparent in the economies o Southern Europe through the Late Payment
Directive, which will come into orce in March 2013, but it will take more than
legislation to change business cultures in which late payment is considered a normal
part o doing business28. A wider push across the international community is urgently
needed to give exporters in mature, developed markets the condence to take the risk
o engagement in emerging and uncertain markets.
Many o the countries
that we operate in
have dubious records
regarding paying or
services provided. The
support rom the British
Embassies and High
Commissions is helpul
but not strong enough
to put pressure on
oreign governments
to act properly and
contractually.IoD member
25 BRICS and the N-11 reer to those economies likely to
drive economic growth in the 21st century by Goldman
Sachs economist Jim ONeill in 2001 and 2005. The BRIC
nations include Brazil, Russia, India and China;
subsequent debate has added South Arica to this list,
and we have chosen to use this BRICS designation.
The N-11 consists o Bangladesh, Egypt, Indonesia, Iran,
Mexico, Nigeria, Pakistan, Philippines, Turkey, South
Korea and Vietnam.
26 World Bank, Doing Business Report 201227 Ibid28 Madeleine Bosch, European Payment Index, Intrum
Justitia, 2012
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6 27
FoCUS MARKETS FoR BRITISh BUSInESSES
With most economic orecasters predicting the worlds economic growth to be centred
on those economies now described as emerging, the Coalition and UK Trade and
Investment (UKTI) have attempted to ocus their energies on markets which, they
believe, will deliver substantial growth or British companies. Many o these markets are
consistent with the BRICS and N-11 categories. The markets UKTI are ocussing on, and
the IoD exporter activity in those areas, are shown in table 15.
As we can see, there has been a growth in the number o IoD members exporting
to each market; some more substantial than others. Interestingly, less growth was
seen in many o the N-11 countries as well as South Arica, suggesting that no matter
how much a government may cheerlead or any given market, issues on the ground
sluggish economic perormance in South Arica, or instance, or the continued
uncertainty and political risk in Iran and Pakistan can act as barriers to urther export
activity.
Several markets have seen substantial growth in the 2 years since 2010, when we last
asked members in which markets they traded. Table 16 shows the 10 markets in which
we have seen the highest growth in the proportion o IoD members active in those
markets. The proportion o IoD members exporting to Colombia, or instance, has
risen rom 3.15% to 6.39% just over doubling in the two years since 2010. Markets
in Arica, South East Asia and Eastern Europe make up the remainder o the top 10,
demonstrating that IoD exporters are taking advantage o the opportunities in these
high potential markets, hal o which (listed in bold) are also on UKTIs ocus list.
With many N-11 countries ailing to live up to expectations or a number o reasons
(most obviously political instability), the IoD is minded to suggest that or UK exporters,
the IoD 10 detailed in table 16 serves as a more cohesive and potentially protable list
o target markets than the more well-known N-11.
Table 15: IoD exporter engagement in UKTI ocus markets
Table 16: The IoD 10 two-year growth in proportion o IoDexporters engaged29
The IoD 10
Market
Clmbia
Gaa
Kea
Serbia
Slakia
Pilippies
Russia
vietam
Mrcc
Idesia
2-year growth in proportion o IoD members active in given market
103%
68%
41%
38%
37%
34%
33%
30%
30%
27%
29 This Top10 list has excluded some smaller markets
which, due to the small sample size, demonstrated
substantial 2-year growth that did not necessarily tell
the whole picture. The proportion o IoD exporters
trading with Togo, or instance, has jumped rom 0.56%
to 0.91% which would place in the top 10, but this gives
an unair impression. As a result, when ranking growth
markets, we took only those markets in which more than
5% o IoD exporters were active in 2012.
UKTI Focus Market
UAE
Cia
Idia
Saudi Arabia
Russia
Sigapre
Malasia
Sut Arica
Tailad
Sut Krea
Qatar
Brazil
Idesia
Taiwa
Egpt
Meic
vietam
Clmbia
N-11 Countries notspecically cited by UKTI
Turke
nigeria
Pilippies
Pakista
Baglades
Ira
n-11
BRICS
Rank IoD exporters engaged
(2012)
9
12
14
18
19
21
26
30
32
33
34
35
36
40
44
4849
67
25
38
47
57
74
86
% o IoD exporters engaged
(2012)
30%
28%
24%
23%
22%
22%
19%
17%
16%
15%
15%
14%
14%
12%
11%
10%
10%
6%
19%
12%
11%
9%
5%
4%
U is rUniversity teachingT is rTilley hats
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8 29
Export type
Callege egagig wit ptetial custmers
Fidig te time t dete t busiess erseas
Diculties idetiig a suitable busiess parter
Weakess relatisips wit erseas ifuecers ad
decisi-makers
oerseas regulatis/legislatiCcer abut securig pamet rm iteratial
custmers/bad debtrs
Callege researcig ew markets
Prtectig itellectual prpert erseas
Lackig i iteral epertise
Currec fuctuatis
Lack irmati abut supprt aailable
orgaisati is t small
Stregt cmpetiti erseas
Dmestic regulatis/legislati
Trasprt diculties/csts
Ccer abut te laguage barrier/lack laguage s kills
oerall cst eprtig
Callege raisig uds
need t iest i alterati t prducts/serice r ew
eprt markets
oter (please speci)
Dicult btaiig credit isurace
Lack demad r prducts/serices
ne
Diculties gettig eprt trade guaratees
% o IoD exporters (2012)
33%
33%
32%
31%
30%30%
30%
25%
24%
23%
22%
20%
17%
17%
17%
16%
12%
11%
10%
9%
7%
5%
5%
4%
Export experiences
As we can see in table 17, the most signicant challenges cited by exporters or their
lack o urther expansion are the challenge o e ngaging with potential customers,
nding the time to devote to business overseas and diculties in identiying a
suitable business partner. These challenges have a lot in common.
The IoD has long elt that increasing connectivity o willing exporters with potential
buyers and business partners could well stimulate substantial export growth. The IoD
remains hopeul that through discussions with UKTI and others it might yet be able
to orge a platorm that enables active and aspirant UK exporters to showcase their
products and services to the world in a single accessible, visible and searchable space.
The IoD stands ready to support and develop such a platorm with willing collaborators
and believes that such an intervention could produce valuable outcomes.
It is important to note in particular the high proportion o IoD members who cited the
diculty o nding the time to devote to business overseas. What this issue raises
is the importance o non-export related supply-side reorms by the UK government.
Business willingness to expand export activity is not always obstructed by a specic
export-related challenge. In this case, IoD exporters are really noting that with the
competing challenges in their business they do not have the time to devote to
research and development o export activities. The Government can only really assist
by reducing the demands on those businesses that nd themselves too time-poor
to expand their export activities. Reducing the regulatory and other administrative
burdens on businesses will release widespread innovation, growth and expansion,
which would not be limited alone to export activity. Widespread and radical reductions
in government imposed calls on businesss time would have a positive stimulus e fect
on export activity.
Beyond these top three barriers, exporters seem to have signicant body o concern
regarding their capacity (in time and human resources) to evaluate and exploit
potential export markets. Cumulatively, nding the time to devote to business
overseas, challenge o researching new markets, lacking in internal expertise,
lack o inormation about support available; account or a selection rom 99% o
IoD exporters. Government and organisations such as the IoD need to consider how
best they can ofer greater levels o support and advice to ease the resource burden o
export exploitation on businesses, a subject we touch on later.
There remain many other actors which have a tangible efect on businesss
unwillingness to urther expand their export activities, including overseas regulation,
concern about bad debtors, protecting intellectual property and many more. This
report could not seek to satisactorily evaluate the basis o these concerns, nor ofer
simple and efective resolutions, but by tackling the connectivity issues and perhaps
reducing the costs and demands associated with researching and engaging with new
markets, substantial improvement could be made.
Table 17: Exporters: why not undertaking greater export activity
Reduce the burden o
domestic red tape to
ree up more resources
to devote to get on and
sell overseas.
IoD member
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The non-exporters their storyTable 19: Non-exporters: barriers to exporting
When looking at table 19, it is worth noting that the non-exporter choice o other
(please speciy) (which ranked second) was driven by recurring themes regarding the
inappropriateness o exporting given the product or service ofering the organisation
produced, and the act that many cited their relative newness to business and hence a
need to concentrate on their domestic market.
As with the previous evidence rom ex-exporters the size o business is a critical reason
or the inertia in organisations presently not involved in exporting. The act that these
businesses consider themselves too small or export activity is telling, but more insight
is available when we look at the percentage selection o this reason in relation to the
size o the business concerned. The longstanding question o just how small, is too
small is perhaps about to be answered.
Reason why exporters stopped exporting
oter (please speci)
Fidig te time t dete t busiess erseas
orgaisati is t small
Weakess relatisips wit erseas ifuecers ad
decisi-makers
Callege egagig wit ptetial custmers
Lack demad r prducts/serices
Diculties idetiig a suitable busiess parter
oerseas regulatis/legislati
Ccer abut securig pamet rm iteratial
custmers/bad debtrs
ne
Trasprt diculties/csts
oerall cst eprtig
Prtectig itellectual prpert erseas
Lackig i iteral epertise
Stregt cmpetiti erseas
Dmestic regulatis/legislati
Currec fuctuatis
Lack irmati abut supprt aailable
Ccer abut te laguage barrier/lack laguage s kills
need t iest i alterati t prducts/serice r eweprt markets
Dicult btaiig credit isurace
Diculties gettig eprt trade guaratees
Callege researcig ew markets
Callege raisig uds
Barriers
orgaisati is t small
oter (please speci)
Fidig te time t dete t busiess erseas
oerseas regulati/legislati
Callege egagig wit ptetial custmers
Weakess i relatisips wit erseas ifuecers ad
decisi-makers
Ccer abut securig pamet rm iteratial
custmers/bad debtrs
Lackig i iteral epertise
Lack demad r prduct/serice
need t iest i alterati t prducts/serices r ew
eprt markets
Diculties i idetiig a suitable busiess parter
ne
Stregt cmpetiti erseas
Ccer abut te laguage barrier/lack laguage s kills
Dmestic regulati/legislati
Prtectig itellectual prpert erseas
Uclear were t start
oerall cst eprtig
Lack irmati abut supprt aailable
Currec fuctuatis
Dicult btaiig credit isurace
Dicult gettig eprt trade guaratees
% o IoD ex-exporters (2012)
26%
25%
24%
21%
20%
20%
13%
10%
10%
8%
7%
7%
6%
5%
5%
5%
4%
4%
4%
3%
3%
1%
n/A
n/A
% o IoD non-exporters (2012)
35%
28%
22%
15%
15%
14%
13%
12%
12%
11%
11%
9%
8%
8%
8%
8%
8%
7%
6%
5%
3%
3%
Table 18: Ex-exporters: why cease exporting? (2012)
Looking at the research (table 18) amongst ex-exporters (those who presently do not
export, but who have done so at some point in the past) it is clear that the reasons or
their exit rom exporting have similarities and diferences rom those current exporters
that eel there are barriers to greater levels o export activity. Putting aside the varied
eedback we received or the other (please speciy) eld (as it was extremely varied),
the top concern was nding the time to devote to business overseas. This issue was
noted in the earlier section regarding exporter barriers to urther activity and is urther
underlined by the act that it is something that both exporters and ex-exporters eel has
held them back.
This however, is where the similarity ends. Admittedly issues or exporters, such as the
challenge o engaging with potential customers and the weakness o relationships
with overseas inuencers and decision-makers commanded broadly similar levels o
support as issues o note amongst ex-exporters. The real nding rom the ex-exporters
is that there is a signicant concern that their organisation is too small. At this stage o
the report we will avoid deeper analysis o this particular nding, but it is worth noting
that non-exporters also note this challenge and we probe this issue in the next section.
As a business in its
inancy we are not
considering exporting
until we are secure
within the UK.
IoD member
Y is rYoyosX is rX-ray
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Table 20 demonstrates the size at which an organisations smallness is most acutely
elt to be a barrier to exporting. Using the established sizes o business as dened by
employee numbers it becomes clear that micro and small (albeit to a lesser degree)
businesses are the most afected by this phenomenon. Nearly hal o all non-exporting
micro-businesses that took part in the research indicated that they were not exporting
because they elt their organisation was too small. This compares with one in ve large
non-exporter businesses who elt they aced the same challenge.
Amongst the community o non-exporters it is important to gauge the propensity o
these businesses to change approach and enter the export markets. Table 21 (above)
shows that only 11% had any plans to begin exporting within the next 12 months.
This shows a very high level o unwillingness to enter export markets in the immediate
uture rom the vast majority o non-exporters.
Those non-exporting members that said they had no plans to begin e xporting within
the next 12 months were then asked whether they had any plans to begin e xporting at
any point in the uture at all. Table 22 shows that 80% o those with no plans to export
within the next 12 months had no plans to export at any point, which means that o
all non-exporters 72% had no intention o becoming an exporter at any point in the
uture. This is an important and signicant nding.
Table 20: Non-exporters: selection o organisation is too smallagainst business size (in employees)
Table 21: Non-exporters: intent to begin exporting within the
next 12 months
Table 22: Non-exporters: intent to begin exporting at any point inthe uture
Option
org. ist small
% of non-exporters
(all sizes of
business)
35%
% of non-exporters
Sole Trader
(0 EE)
31%
% of non-exporters
Micro
(1-10 EE)
48%
% of non-exporters
Small
(1-49 EE)
41%
% of non-exporters
SME
(1-249 EE)
38%
% of non-
exporters
Large(249 > EE)
20%
% o non-exporters (all sizes o business)
11%
86%
8%
% o non-exporters (all sizes o business)
8%
80%
12%
Plan to export in next 12 months
yes
n
Dt kw
Plan to export in next 12 months
yes
n
Dt kw
Government advice and supportWith international trade ever more important to the economic uture o the UK, advice and
support services continue to have an important role in adequately equipping British businesses to
take their place on the international stage. In addition to Government inrastructure, a number o
private sector providers also ofer a wide range o services.
IoD members, both exporting and not, told us that their sources o advice were many and
difered substantially depending on where that member was in the export cycle. Exporters and
those who had exported previously, were ar more likely to rely on existing business contacts than
new exporters, who were ar more likely to seek support rom organisations such as UK Trade and
Investment or the Institute o Directors, as we can see below in graph 9.
As we have shown elsewhere in this report, most new exporters are more likely to take their
rst cautionary step into exporting close to home usually within the European Union. The
high proportion o those exporters who would seek advice rom UKTI beore embarking on
international trade suggests that UKTI should, as well as ocussing on the high-growth
emerging markets urther aeld, retain an institutional knowledge and enthusiasm or more
mature markets.
Though a survey o IoD members and thereore a somewhat sel-selecting sample, it is also
worth noting that among business groups and the Department or Business the IoD scored
commensurately higher, particularly or non-exporters. Private sector providers, including the IoD
and other groups, clearly have an important role to play in the provision o export advice services.
UK TRADE AnD InvESTMEnT & UK ExPoRT FInAnCE
UK Trade and Investment, launched under a slightly diferent guise in 1999, is a Government
department which, according to its website, works with UK-based businesses to ensure their
success in international markets, and encourage the best overseas companies to look to the UK
40
35
30
25
20
15
10
5
0
Percentagethereof
Which institution or organisation have you / would you seekinternational trade advice from?
Organisation
Exporters
Previous exporters
Non-exporters
Exist
ingbu
sines
s
cont
acts UK
TI
Dont
know
Othe
rIo
D
Cham
bers
of
Com
mer
ce Expo
rt
cons
ultan
ts
Acco
unta
nts
Dept
.forB
IS
Othe
rgov
t.
Retailb
anks
LEPs
Socia
lmedia
netw
ork
Graph 9: Organisational and institutional advice
For us it is not a
Government matter.
We have no current
interest in the expansion
which exporting would
require.
IoD member
Z is rZoom lenses
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as their global partner o choice. Ofering proessional advisers, market inormation
and research, and running a number o delegations and trade shows, UKTI take what is
generally seen to be a pro-active approach to promoting the UK abroad.
In addition, UK Export Finance the UKs export credit guarantee scheme provides
insurance and nancial support to exporters and overseas buyers in order to stimulate
UK exports. This includes insuring UK exporters against non-payment, helping overseas
buyers to nance purchases o UK goods and services by guaranteeing bank loans, and
insuring UK investors against political risks overseas in cases in which insurance is not
available via the private sector. Together, UKTI and UK Export Finance make up much o
the Governments export support inrastructure.
IoD exporters, on the whole, are aware o UKTIs services and generally positive. More
than two-thirds (67%) were aware o UKTIs services, and o those over hal had utilised
the provisions available (57%). As we can see rom graph 10 below, the eedback o
those users is broadly positive with 58% describing the service as good or very good.
UK ExPoRT FInAnCE
Providing a more niche service than UKTI, UK Export Finance is unsurprisingly less well-
known and under-utilised compared to its bigger brother. 37% o IoD exporters were
aware o UK Export Finance, and o those only 8% had used the service. As we can see
presented in graph 11, the satisaction with service provision at 42% is still relatively
strong compared to other Government initiatives, but a worrying 32% came away rom
their experience o UK Export Finance rating the service as poor or very poor.
UK Export Finance needs to do more to ensure the services it provides are better-
known, more suited to the needs o business, and better-delivered than they are now.
Certainly, the level o bureaucracy involved in engaging with UK Export Finance causes
concerns. For instance, the UK Export Finance bond support application document runs
to 33 pages, whereas the Swedish equivalent is just 9 pages, and as in so much o the
business environment the IoD would urge that administrative procedures such as this
are as streamlined as possible31. We are also concerned that the 1.5bn direct lending
acility announced by Chancellor George Osborne in the 2012 Autumn Statement is
not necessarily the best way to improve UK Export Finances service. Rather, we would
urge UK Export Finance and UKTI to more closely work together to develop a wider
knowledge base within the Governments export support inrastructure, particularly
at the public-acing level. Anecdotally, IoD members oten complain that UKTI and
UK Export Finance tend to work at diferent speeds and with diferent priorities, an
avoidable problem. In addition, with the ear o late payment a signicant concern or
exporters o all sizes and in particular in emerging markets, we would encourage UK
Export Finance to in particular increase awareness among businesses o their services in
that area.
Such high satisaction gures among the IoD membership are rare or Government
initiatives. For instance, when asked about the work o Regional Development Agencies
in 2009, only 18% o members stated that RDAs were perorming well or very well30.
There are o course grounds or improvement; some o our members told us that the
Overseas Market Inormation Service (OMIS), which charges a ee or market research,
would be more popular i it was ree or reduced in price; though we understand, o
course, that unettered access to the service could lead to it being swamped with
requests. But generally members responded to questions about UKTI by suggesting
that Government should support its work and services.
Members would also like to see single points o inormation on oreign markets. This
is perhaps a point linked to the price o OMIS, though many ree one-stop shops are
available including through UKTI. Increasing awareness o these should be a priority.
Very good
Good
Neither good nor poor
Poor
Very poor
Dont know
21%11%
37%
26%
4% 2%
What was your experience of the service offered by UKTI?
Very good
Good
Neither good nor poor
Poor
Very poor
11%
37%
21%
26%
5%
What was your experience of the services offered by UK Export Finance?
Graph 10: Experience o UKTI
Graph 11: Experience o UK Export Finance
Allow better exposure o
UK business to overseas
companies by sponsoring
trade missions o smaller
companies.
IoD member
A ully-researched
but airly brie (bullet
points!) directory o
what each overseas
countrys main exports
and imports are and
how best to trade with
them plus the problems
relating to payment.
Surely this is obvious?
IoD member
No matter what else has
to be cut, do not reduce
the size and scope o the
UKTI support network
in embassies and high
commissions.
IoD member
We are about to embark
on the UKTI Passport to
Export scheme which
seems a wonderul and
thorough scheme.
IoD memberTry to provide a single
point o reerence with
the knowledge and
resources to be able to
provide authoritative
guidance with respect to
export controls.
IoD member
30 Survey o over 800 Institute o Directors members
conducted in March 2009
31 House o Lords Committee on Small and Medium Sized
Enterprises, British Exporters Association, Institute o
Directors and Institute o Exports Oral evidence (QQ 73-
92) heard on 18th October 2012
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ConclusionThe Institute o Directors and the All Party Parliamentary Group on Trade and
Investment believe that this report adds genuine value to a heavily populated eld
o research and commentary on the nature o British exporting. Where others have
typically proposed interventions with limited evidence, this report seeks to provide the
evidence with little in the way o directive suggestions or the public policy community.
We hope that by avoiding knee-jerk assertions or demands or government
interventions the report will be read and used by a wide base o interests.
The report shows the inspiring aspiration and ambition o British businesses. IoD
members rom right across business are developing international trade connections at
pace. 57% o IoD members export nearly double the national average, and this gure
is the latest in a steadily increasing trend. IoD members, represent the business leaders
that will help push Britain on in what Prime Minister David Cameron has described as
the global race.
The dominance o the UK service sector in the domestic economy translates through
to international trade. Though there clearly remains work to be done to stimulate UK
manuacturing, just under hal o IoD members (45%) do trade goods, and this is cause
or optimism. Perhaps too it is important to note that or a ull hal o IoD members,
export activity accounts or less than 30% o their organisations turnover. Encouraging
these exporters to expand their export activity to greater proportions will surely
produce dividends at the micro- and macro-economic levels.
Rather than retreating to the relative saety o domestic or mature markets, IoD
members are actively pursuing opportunities in emerging markets that, though
challenging, ofer great potential rewards. Though Europe remains the market to which
most IoD members export, it is important to note that exports to all other markets
have increased over the past two years, most noticeably in Asia and the Middle East.
Though there is discernible movement o export activities rom established markets
to emerging economies, the rank order o world markets remains largely unchanged
rom that observed by our members two years ago. Businesses now anticipate yet
more growth in Asia than Europe and more in the Middle East than North America
suggesting that the pace o change is now accelerating. The signicant strides
made by IoD members into the se lection o markets we have dubbed the IoD 10,
predominantly in Asia, Arica and Eastern Europe, is urther evidence that British
businesses are increasingly thinking as much about Mombasa and Moscow as they are
Munich and Miami.
The strong correlation we have ound between the personal and institutional
experience o IoD members, their businesses and their engagement in emerging
markets suggests that there is reason to eel optimistic that many new exporters, who
may at this point be trading only in one or two oreign markets, will in time look urther
aeld and become truly global businesses.
It would be wrong though to suggest that everything in the international trade garden
is rosy. Exporters and ormer exporters alike cited the challenges o engaging with
potential customers, the diculties o identiying suitable business partners abroad
and nding the time to devote to business overseas as barriers to export activity.
Developing better ways or British businesses to connect with international audiences
and customers should be a priority or all those engaged in the pursuit o a healthier
balance o trade.
Though not all businesses can export despite our belie in the importance o
international trade, we would not propose that every Public House in the land attempt
to export their Sunday roast we nd it very interesting that 86% o IoD members
who do not currently export have no plans to do so within the next year, and 71% had
no plans to do so at any point in the uture. It is beyond the scope o this report to
suggest whether this is a poverty o ambition or a realistic appraisal o the limitations
in member businesses. What is important is to note that non-exporters are unlikely to
be encouraged to export by existing public policy interventions. O exporters, only one
in ten cited advertising and trade shows as a trigger to their current export activity. The
real challenges (and potential triggers) seem to exist elsewhere.
Signicantly, many IoD members whose organisations employed ewer staf noted the
more modest size and scale o their business as a reason or not exporting. Convincing
these organisations that they are in act big enough to export would be a signicant
boon to the UK economy, but wrapped within this concern about size, it is possible
that many sub-reasons such as late payment, corruption and transport costs are the
real disincentives.
Broadly speaking, those who do not currently export are more likely to consult UKTI
and private sector providers or advice on exporting. Those who are already engaged
in exporting are ar less likely to draw upon these assets. Established exporters are ar
more likely to believe that existing business contacts provide the best support and
advice as they seek to expand their export activity.
UKTI, at least compared to other government support bodies, is looked upon
avourably by IoD members. Awareness o UKTI is high, as is uptake o the services
though, as always, there is still room or progress. UK Export Finance, however, has
more work to do; awareness is low and uptake lower still. The service standard is
considered variable. Though we appreciate UK Export Finance has a more niche role in
the delivery o export support services, there is scope or improvement.
The overall picture, however, is o IoD members responding to domestic economic
conditions by seeking growth abroad, oten in emerging markets. With continued
support, the IoD and the APPG or Trade and Investment eel condent in Britains
ability to compete in the global race.
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Collectively, IoD members export to every countryin the world
And of the43% who do not export
Of those
who had
neverexported
The most common obstacles
The changing balance of exports
The top three regions were:
20102 2012
EU
BRIC
N113
of all UK businessestrade internationally1
Exports
57%
72%
84% 82%
35% 43%
32% 39%
31%
Survey 2012
distilled
The2012 PolicyVoiceExport surveywas conductedbetweenthe 14th andthe 23rdNovember 2012.1,162 IoD members participatedin thestudy.1 Accordingto ExportingforGrowth,a 2010 reportby UKTI,the percentageof UKfirms doingbusiness overseas rosefrom 26% to 31% between2008 and2010.2Figures taken from IoD PolicyVoiceNovember 2010 studyonexports.3N-11 refers to thenext 11 thoseeconomies seenas likelyto beat theforefrontof economic growth inthe21st centuryby GoldmanSachs andeconomistJim ONeill in2005.These countries are:Bangladesh,Egypt,Indonesia,Iran, Mexico,Nigeria, Pakistan,Philippines,Turkey, South Korea andVietnam.
of IoD members export
goods or services, including
55% of SME members
said they
had no
plans todo so
Size of organisation
Finding the time for overseas business
Overseas regulation
35%
had exported at some point previously27%
22%
15%
Some of
IoD members
more unusualexports
Sheepskin flying
jackets to Russia
Hair extensions
to Zimbabwe
Specialist tea
machinery to India
Prosthetic limbs to Malaysia
Woodwind instruments to Thailand
Caravans to Australia
Ice skating blades to Argentina
vs
The top 15 export destinations were:
1. Germany 2. France 3. USA 4. Netherlands 5. Ireland
6. Spain 7. Italy 8. Belgium 9. UAE 10. Sweden
11. Australia 12. China 13. Canada 14. India 15. Denmark
l
sa
h
pld
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