KPMG calls on Scottish SMEs to seize global export opportunities

KPMG has launched an in depth guide and online export assessment tool for businesses considering the opportunities presented by overseas markets to boost sales, as the UK defines a new trading regime as part of Brexit plans.

Outside of financial services, currently only six percent of companies based in Scotland export, meaning many miss out on potentially millions in revenue, according to a report by World First.

KPMG’s 60 page Going Global guide comes as research from the Centre for Economics and Business Research (CEBR) recently found the UK ranked in the top five spots for the level of absolute exports.

However, this is mostly due to the success of larger firms trading overseas and leaving SMEs potentially missing out on a wealth of opportunity to expand their international footprint, KPMG said.

Neal Allen, director at KPMG in Scotland, explained: “Having an overseas strategy makes sense for any business looking to grow but is particularly important for SMEs that function with very tight profit margins. Many of those, particularly in Scotland, are often, or wholly reliant on their domestic marketplace. As our departure from the EU gets closer, and with the weak pound proving attractive to overseas buyers, now is the time to reach out to new customers and suppliers further afield. Almost half of UK exports in goods and services went to the EU last year so any increases on duties could impact tight margins making it sensible to start exploring the other options now.

“Many companies we work with have a product or a service they believe is suitable for export, but see a number perceived barriers and pitfalls which prevent them from making the most out of exporting opportunities.

“Whilst ‘going global’ can be a complex task with financial, tax, legal and cultural implications to consider, exporting can also enable a business to diversify its income streams and supply chain, therefore mitigating against market risk. By 2020 China, USA, India, Japan and Brazil are expected to be the leading nations by GDP and UK businesses should be forging links with these countries to get their share of the golden opportunities on offer.”

KPMG’s online export assessment tool has been designed to help business understand how ready they may be or what they need to focus on in order to progress their overseas ambitions. In 2016/17 the DIT provided £3 billion in export support to UK companies helping hundreds of businesses to sell to more than 60 countries around the world – 79 per cent of these companies were SMEs.

Trade within the UK accounts for four percent of GDP, leaving a 96 per cent opportunity for businesses who take the step of trading abroad. Business services and technology exports are particularly strong and a weaker pound has resulted in sectors such as food and drink growing exports to a record £20.2 billion in 2016, as demand for quality British goods has strengthened and UK exports have become more competitive. A report by World First last year found by trading their goods and services internationally the typical exporting SME added over £287,000 in revenue over 12 months, whilst Google‘s 2017 consumer survey found that UK SMEs cite international marketing and operational barriers as the biggest barriers to success abroad.

KPMG said ‘Going global’ has been designed to provide a handy reference on which countries would make the best destinations for expansion by providing readers with an easy reference of the top countries for GDP, competitiveness, tax rates and best for starting a business – the top five of which are outside the EU. For example, Australia and New Zealand top the ranking of having the best construction permits, whilst the largest megacities are Tokyo and Jakarta and none of the predicted top five countries by GDP are expected to sit in Europe by 2020.

The comprehensive report divided into four sections according to the maturity of a business’s overseas strategy: from exploring markets for businesses who have little or no footprint overseas, to developing strategy for those businesses who have existing operations abroad through to evaluation for those businesses who are already operating abroad successfully. It also helps businesses to assess the cost versus the benefits and the risk versus the return for those companies who are considering ‘going global’ and has country breakdowns on issues such as political stability, tax and regulatory regime and labour force skills for the 10 fastest growing economies currently.

Karen Briggs, head of Brexit services at KPMG, added: “We have also seen an uptick recently in the number of larger corporate clients who are coming to us for our support in helping them to plan for Brexit. Issues such as immigration and the broader workforce agenda, contingency planning for supply chain security post March 2019 and the need to explore new trade corridors together with the impact of potential tariffs are now front of mind as we head into the New Year. We are expecting this activity to get even busier during early 2018; whether there is a move to discuss future trade agreements or whether business needs to start to prepare for WTO rules as the reality of life post Brexit draws closer.”