So you’ve decided it’s a good idea to have a look at exporting but need a bit of context to understand why it’s potentially beneficial to your firm? Up and down the country SMEs are asking themselves the same questions. Before I give you good news on how exporting benefits your productivity and competitiveness, let’s examine something of the context.
How Big is the UK Market?
Well, the UK has a population of 62 million compared to a world population which has just passed the 7 billion mark, making it roughly 0.8% of the world’s people. If you use GDP as a measure of wealth the UK accounts for roughly 4.5% of the world’s wealth. Our exports of goods make up 3% - and services 7.5% - of world trade.
How Many Different Countries Are There?
Arguably there are 196 countries in the world although there are other territories and principalities that technically are not different countries but may have a separate profile.
There are around 160 different currencies in use, but the majority of world trade is transacted in the top 8 to 10 currencies.
How Big is the European Union?
The 27 countries of the EU comprise 502 million people, making the UK c. 12%. We have a similar percentage of the EU’s total GDP. UK firms have tariff free access for goods and services to the entire bloc.
What About Other Trading Blocs?
The EU is the world’s biggest trading bloc but there are three other major regional blocs: NAFTA in North America, ASEAN in South East Asia and MERCOSUR in Latin America. There are about a dozen others such as SADC in Southern Africa and CARICOM in the Caribbean but these are the most significant. Countries within the blocs will have preferential access to their markets.
What Are Tariffs ?
Within the EU none apply but exporting outside of the EU may incur a tariff or tax on imports into those countries. You can find out which ones may apply to you on the EU Market Access Database website When exporting your customer will have to pay these and you will need to understand how it affects your costings.
How Many Languages Will I need?
There are in the region of 6500 languages spoken in the world. The 30 most common languages, however, are spoken by around 90% of the world’s population. English is spoken as either a first or second language by in the region of 2 billion people. You will of course encounter many cultural differences. Respect the differences and you will benefit in the long run.
I’m a Service Company. Can I Export?
For the last 30 years the ratio of goods to services exports around the world has been consistently in the region of 80:20. The UK’s export of services has been much higher with a ratio of 60:40. The simple answer, therefore, is that of course you can and indeed the UK has been pretty good at it. With the continued rise of the internet many of the distance barriers that may have existed are disappearing.
So Sum It Up For Me.
Limiting yourself to selling to less than 1% of the world’s population (the UK) doesn’t seem like an ambitious plan for growth. You can look at the European Union as your extended home market but even that accounts for only 7% of world population. The world is a huge place but you can make it more manageable. With careful planning and taking appropriate advice communication, payment and technical issues can all be overcome.
Two thirds of recent growth in world trade has come from new firms entering the export market rather than through existing exporters increasing their export flows. The clear message is that around the world businesses are starting their export journey for the first time and are in the vanguard of the growth in world trade. UK firms need to get started or risk being left behind.
OK, I Understand That, But What Are The Benefits?
By learning about export markets you grow your ability to adapt and become more competitive. Evidence shows that exporting firms gain a 34% boost to their productivity in the first year of trading internationally and are around 12% more resilient or, put another way, more likely to survive through difficult times. Exporters in fact contribute 60% of total UK productivity growth, they are 75% more likely to invest in R&D, they achieve economies of scale not possible in the UK alone, they extend the life cycles of their products and significantly improve their financial performance. Even better news is that exporting companies learn lessons on adaptability which they take into their domestic markets and as their export sales grow their home sales grow too!
There’s no better time than today to get started. Where in the world will your company be in twelve months time?
7 comments
Comment by Darren Mason posted on
Great blog as always, that's coming from a director of a very small new company looking to expand into the European market
Comment by Clive Drinkwater posted on
Hi Darren,
Glad you enjoyed the blog. I trust you're getting some help from your local UKTI people regarding your expansion into Europe. If not, email me and I'll make sure an adviser comes to see you.
Cheers,
Clive
Comment by Joy Phido posted on
Amazing report. This sums it all for me. I have been toying with exporting my training but this makes my case a lot easier to understand. Nothing beats a great statistics.
Thanks as always.
Comment by Clive Drinkwater posted on
Thanks Joy,
Really pleased you've decided to get started. May I suggest we get one of our international trade advisors to come out to see you and talk you through the options. If you let me know which part of the country you're in I'll make sure somebody from your area contacts you.
Kind regrads,
Clive