BCC: Boost SME export support to navigate uncertainty

On the day (Tuesday) that trade experts from Chambers of Commerce at home and in overseas markets across the world gather for the BCC Global Business Network conference, the British Chambers of Commerce, in partnership with DHL, publishes its latest Quarterly International Trade Outlook, which indicates that uncertainty following the vote to leave the European Union is slowing down export orders in the services sector.

The services sector saw a slowdown in growth, with the balance of businesses in the sector expecting an improvement in sales and orders also falling to its lowest level in five years.

In contrast, the report also shows that a greater proportion of manufacturers enjoyed an improved export performance compared with the second quarter, with some benefiting from sterling’s recent fall. This is also replicated in an improvement to the sector’s future orders.

The report’s Trade Confidence Index, which measures the volume of trade documentation issued by accredited Chambers of Commerce, fell by 4.14% on the quarter – following the surge of documentation issued before the EU referendum – but remains 5.32% up on the same quarter of 2015.

The results show that exports are expected to grow at a slower pace in the coming months, and confidence in turnover and profitability has also fallen in the medium term. The BCC calls on the government to use the Autumn Statement to increase resources to directly support SME export plans, providing direct monetary support for firms to explore new markets or deepen sales abroad.

Key findings from the report are:

• The Trade Confidence Index, a measure of the volume of trade documentation issued nationally, fell by 4.14% on the quarter, but rose by 5.32% compared with Q3 2015. The Index now stands at 121.69, and remains high by historical levels
• The balance of manufacturers reporting improved export sales rose to +17%, up from +9% in Q2. However, the percentage balance of firms in the services sector reporting improved export sales fell three points to +8%
• The balance of manufacturers reporting improved export orders rose to +12%, from +5% in Q2. Again this balance fell for firms in the services sector, to +5% from +13%
• Looking at expectations of profitability over the next 12 months, the balance of firms expecting it to increase in the manufacturing sector fell to +22%, from +28% in Q2
• In the services sector, this fell sharply from +33% to +15% in Q2 – the lowest level in four years.

Commenting on the findings, Adam Marshall, BCC Director General, said:

“While factors including the weaker pound have benefited manufacturers when it comes to exporting, the services sector continues to face challenges. The decline in export orders in the services sector is concerning considering the sector is by far the largest part of the economy.
“Our data suggests that slower growth is likely to come in the months ahead. However, it is important to note that while the UK’s economic growth may slow further, we are unlikely to enter a recession.

“To fire up the animal spirits of our exporters, and boost business confidence, the Chancellor should use the Autumn Statement to improve direct financial support for firms looking to access new markets without bureaucracy or delay. Enabling businesses to attend trade missions, trade fairs, commission market research or make themselves export ready would be a shot in the arm for our trade performance at a time of uncertainty.”

Phil Couchman, CEO, DHL Express UK, said:

“As the EU referendum approached there was an underlying sense of uncertainty on the part of British businesses and, despite a strong Trade Confidence Index against last year, this latest report shows that that feeling still exists – even amongst the manufacturing exporters currently enjoying the UK’s increased global competitiveness as a result fall in the value of the pound.

“Businesses are now seeking advice and reassurance about getting their goods and services overseas and it is important that businesses and government work together as EU negotiations progress. At DHL, we will continue to leverage our strength in navigating complex customs processes to encourage the UK’s exporters to be confident in their ability to grow and succeed internationally.”