SMEs target overseas trade outside EU

Medium-sized companies are more likely to expand into new markets than small businesses, a new study reveals.

The majority (55 per cent) of small to medium-sized firms plan to enter new markets in the next two years and of these, more plan to look beyond the Eurozone for new overseas trade than within it, according to a recent study by Albion Ventures.

Despite being the UK’s largest overseas trading partner, more than one in five (21 per cent) SMEs plan to do more trade with countries outside the EU over the next two years compared to 16 per cent who are targeting the single market.

The report shows that appetite among SMEs to target new overseas markets since the Brexit vote has grown from 34 per cent in 2015 to 37 per cent, significantly more than those who are focused on expanding domestically (29 per cent). A further 13 per cent small businesses plan to grow through launching new products and improving their online services.

The fourth Albion Growth Report, designed to shed light on the factors that both create and impede growth among over 1,000 SMEs, shows that medium-sized companies are more likely to be looking to expand into new markets (76 per cent) than small businesses (50 per cent).

New challenges

Entering new markets is not without its challenges; in fact half (50 per cent) of firms who have taken the plunge reported experiencing problems, the biggest were not having the right staff (13 per cent); lack of expertise in the new market (12 per cent); regulatory obstacles(11 per cent); and strong competition (11 per cent).

In sector terms, more than three-quarters (79 per cent) of transportation firms plan to enter new markets, the highest of any sector. Manufacturing businesses (75 per cent) and the tech sector (72 per cent) were second and third respectively. The manufacturing sector is clearly the most positive about continuing relationships in Europe, a third (34 per cent) look to enter new markets in the EU.

In preparation for the push into new markets, more than half (54 per cent) of SMEs are developing new products/ services, developing/expanding their website (38 per cent), and a quarter are expanding their sales team (25 per cent).

Patrick Reeve, managing partner at Albion Ventures, says, ‘The good news is that most SMEs plan to grow by tapping into new markets. Given the uncertainty of our long-term trading relationship with the single market, policymakers will be pleased that small businesses are increasingly looking beyond the Eurozone for new overseas growth opportunities.

‘This strategy makes sense in theory but many CEOs will know that it’s tough to execute in practice as they often lack the right staff, expertise and regulatory know-how. This is where fast-growth firms can benefit from partnering with an experienced equity investor, which can provide valuable hands-on support. For businesses that get it right, conquering new markets can have a transformational impact.’

On a regional basis, SMEs in London are the most likely to enter new markets in the next two years (68 per cent) followed by those in the North East (61 per cent) and Yorkshire & the Humber (59 per cent). Small firms in the East of England are the least inclined to break into new markets with only 46 per cent planning to do so, followed by those in Wales and the South West (both 47 per cent).

Further reading on overseas trade

Owen Gough, SmallBusiness UK

Freddie Halvorson

Owen was a reporter for Bonhill Group plc writing across the Smallbusiness.co.uk and Growthbusiness.co.uk titles before moving on to be a Digital Technology reporter for the Express.co.uk.

Related Topics

Overseas expansion