British companies look to emerging markets for growth

By Daniel Hunter

Asia has over-taken the European Union as the market in which exporters expect to see the most growth over the next five years, new research from the Institute of Directors (IoD) and the All Party Parliamentary Group on Trade and Investment reveals.

The report, launched yesterday (Tuesday) in the Houses of Parliament, also shows that Asia has moved ahead of North America as a destination for UK exports.

The report presents the findings of a Policy Voice poll of 1,162 IoD members which ran from Wednesday 14th November until Friday 23rd November 2012.

Key Findings

EU is still the top destination for exports…

The European Union remains the market in which most IoD members are active. However, the percentage of IoD members trading in the EU is falling (from 84% to 82% between 2010 and 2012), whereas the percentage in Asia is on the rise (from 39% to 47%). The EU was the only market to see a decrease in activity, with strong growth in the Middle East in particular (38% in 2010 to 44% in 2012). For the first time, IoD members are more likely to trade in emerging Asian markets than with the mature markets of North America (47% to 46%).

…but businesses expect faster growth elsewhere

Asked which markets they expected to deliver export growth over the next five years, Asia came out top, with 50% of IoD exporters optimistic about their prospects there. Compared with two years ago, members are far more pessimistic about future trade with Europe. Only 43% anticipate their export activity to grow in the EU over the next five years, a fall from 58% in 2010.

Exporting remains difficult for small businesses

In order to reduce our trade deficit, more businesses must be encouraged to export. The survey reveals that 57% of IoD members export, considerably higher than the national figure of 31%, indicating that there is scope for more UK companies to begin exporting. Half of members gain less than a third of their turnover from exports, showing that there is also significant potential for expansion by existing exporters.

However, the risks associated with exporting still put off small companies. 35% of businesses said their organisation was just too small to export. Worryingly, 72% of companies which had never exported said they had no plans to do so.

Commenting on the research, Alexander Ehmann, Head of Enterprise Policy at the IoD and author of the report, said: “Given the on-going troubles in Europe, it is perhaps not surprising that exporters are looking to emerging markets for growth. Expansion into new markets is critical if the UK is to address its truly alarming trade deficit. Policy-making should focus first on encouraging those firms for which export activity is only a small part of their business to expand to greater levels.”

Margot James MP, Chair of the APPG on Trade and Investment, said: “I’m delighted that the APPG and the IoD are able to contribute to the debate around Britain’s international trade activity and pleased by the positive conclusions in this report. Growing exports is fundamental to the success of the government strategy of re-balancing the economy, and it is our job to help remove the barriers facing exporters whilst also working to encourage more of our world class British businesses to take their products and services abroad.”

|International Trade News|