iod and appg "ice skates to argentina"

7/30/2019 IoD and APPG "Ice Skates to Argentina"

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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

116 Pall Mall, London SW1Y 5ED

COPIES AVAILABLE FROM:

Policy Unit

Institute o Directors

116 Pall Mall

London SW1Y 5ED

T: 020 7451 3103

F: 020 7839 2337

E: [email protected]

W: www.iod.com/policy

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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D Researc Paper

7

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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9

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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11

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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13

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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6 17

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

K is rKettlesJ is rJoinery


10/21

19

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

M is rMarine seismic measuring devicesL is rLower limb prosthetics


11/21

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


12/21

23

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


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


13/21

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


< 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



1120years

2130years

More than30 years

100%

80%

60%

40%

20%

0%

Percentagethereor



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

S is rSheepskin fying jacketsR is rRigging or entertainment shows


14/21

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


15/21

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

W is rWater storage tanksV is rValves or the nuclear industry


16/21

31

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)



Weakess relatisips wit erseas ifuecers ad

decisi-makers


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




Dmestic regulatis/legislati

Currec fuctuatis



need t iest i alterati t prducts/serice r eweprt markets


Diculties gettig eprt trade guaratees

Callege researcig ew markets

Callege raisig uds

Barriers


oter (please speci)


oerseas regulati/legislati


Weakess i relatisips wit erseas ifuecers ad

decisi-makers

Ccer abut securig pamet rm iteratial

custmers/bad debtrs


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



Dmestic regulati/legislati


Uclear were t start

oerall cst eprtig


Currec fuctuatis


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


17/21

Ice Skates t Argetia: ID Member Eprt Treds 201213

33

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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35

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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37

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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