With Chancellor George Osborne targeting £1 trillion in exports by 2020 and recent UKTI figures showing that exporting by UK businesses is decreasing, there is clearly a disconnect between government targets and the reality of what’s happening.
The latest available stats from UK Trade show that this downward trend is continuing, with total trade exports for August 2015 at £23.5 billion, a decrease of £1.1 billion (4.6%) compared with the previous month.
Retail is one of the biggest sectors in the UK, with a reported worth of £177.5 billion in the year to March 31st 2015. We believe that UK small and medium sized retailers represent a huge amount of untapped potential in terms of increasing trade overseas. Minister for Trade and Investment, Lord Francis Maude just recently reinforced this message at the Exporting is GREAT launch remarking ‘travelling overseas in my capacity as Minister for Trade, I see first-hand the demand that exists for UK products and services’. The reality is that other countries want what we have to offer – from whiskey to chocolate, breakfast cereal to cheese, British retail products are world leading.
What’s also important to recognise is that the domestic UK market is limited in size, while the rest of the world is obviously less so. The UK’s top trading partners in terms of exports are the USA, Germany, France, the Netherlands and China, representing huge buyer potential.
What holds back many smaller retailers, however, is uncertainty. From working with them we know it’s not just fear of the unknown, it’s fear of the hassle involved. Research by the British Chambers of Commerce cited compliance with local tax regulations as one of the key challenges for businesses looking to export. Small (40%) and micro businesses (26%) were least likely to be already operating internationally, compared to 45% of mid sized businesses. The ambition is there for smaller sized businesses to export, with the largest proportion considering themselves as ‘potential exporters’ (21%), but confidence is lacking.
Reassuringly, it’s not as onerous as some might think, especially as technology is evolving to connect the dots across borders.
One area where worry can be eliminated is invoicing. Different countries have different invoicing laws, whether you have to invoice electronically or not. If you’re doing business in Mexico, as an example, the tax administration service there has mandated the use of electronic invoicing under heavy regulation. Things tend to work differently in the EU, where governments are generally less likely to get involved with invoicing processes, so we see different policies. However, change is afoot and some EU countries are beginning to follow suit as they cotton on to the tax collection benefits of e-invoicing. From January 2016, Hungary is one such country which will introduce new rules requiring businesses to report invoice data to them on a quarterly basis.
It’s worth noting, however, that benefits to a government’s tax department don’t always mean benefits to a commercial business. Processes are often designed with the goal of collecting VAT without necessarily taking into account the needs of businesses to use purchase order numbers. Navigating this minefield can be tricky, but by using an e-invoicing platform it’s possible to input the data to an online form or submit the files in an integrated way. This can then be cross-checked against each country’s rules to ensure the payment gets through.
From a cash flow perspective, it’s also important to get it right. Imagine exporting your company’s marshmallows to a reseller in China, only for the payment to be delayed for another 30 days because of a small formatting error. If you’re relying on those funds for your next batch of ingredients or to pay your staff, this cashflow crunch could be critical to business.
There is clearly a lot to consider when making the step to expand abroad, but to meet Osborne’s targets and turn Britain into an exporting nation, it’s time for our retailers to explore the opportunities offered by trading overseas. Tungsten isn’t the only example of a business looking to help. There’s a lot of advice and support available to help retailers start exporting, with many high street banks offering guidance for business customers and the government launching the Exporting is GREAT five year programme, providing a downloadable export guide and contact details for all local export support networks across the UK.
The world really is your oyster, so go on, and take the leap.
By Lucy Ashdown, head of compliance at Tungsten Network