Historically, UK manufacturers have had less exposure to emerging markets, instead focusing on developed markets across Europe. With British manufacturers accounting for 44% of all UK exports, a figure which totaled £224.3 billion in 2014, it is clear how important exports are to the overall health of the sector.
However, with challenges such as the widening gap between a strong pound and weaker euro continuing to make UK goods more expensive for our main trading partner, thereby reducing our competitiveness across the continent, manufacturers may need to look to alternative markets for future opportunities.
Improving export performance, particularly to emerging markets across Asia, such as China, is a key aspect of the Government’s Productivity Plan and it is clear that encouraging manufacturers to diversify into more regions is important to the future growth of the industry.
To support this it is vital that mid-market manufacturers looking to export globally have the necessary backing from banking partners and that strategic partnerships, such as that between Lloyds Bank and UKTI, help more firms to trade internationally through the provision of export advice and supporting infrastructure.
A key part of sharing best practice is to ensure any exporting business understands how to mitigate risk, be that through agreeing acceptable payment terms upfront, ensuring robust agreements are in place with customers and suppliers or setting up invoice discounting to free up cash flow for those that sell on credit. UKTI and the Foreign and Commonwealth Office also provide topical information that can help businesses further understand possible risks in markets experiencing political and economic instability.
It is also important for manufacturers to remember that payment terms and legal practices vary from country to country. This can impact on cash flow, so it is essential for businesses to take these factors into consideration when planning their export strategy. For example, fully understanding the VAT rules administered by HMRC is crucial, as is an awareness of any export controls which relate to specific products. There can also be barriers such as language and cultural differences that may need to be overcome.
Although exports are currently in decline across the sector, there is a clear opportunity for manufacturers to buck this trend by turning to emerging markets.
