The House of Lords committee on Small and Medium Sized Enterprises (SMEs) has called on government agencies UK Trade and Industry (UKTI) and UK Export Finance (UKEF) to do more to ensure small and medium sized businesses know where to go for help in exporting.
There are nearly 5M SMEs in the UK. The Committee’s report, Roads to Success: SME Exports, recognises that they have a crucial role to play if the UK is to achieve export-led recovery.
The committee were shocked by the very small number of SMEs helped by UKEF with only 21 receiving help from the agency up to August 2012. The report calls for UKEF services to be better promoted both to SMEs and banks, which act as the gatekeeper to the scheme. The committee say that unless banks are prepared to take on some of the risks of lending to exporters then UKEF’s programmes are ‘dead in the water’.
On availability of finance for SME exporters from banks more generally, the committee found that the transition from loan decisions being made by local bank managers to a centralised process driven by formulae has weakened SME access to bank finance. They say that local bank managers are much better placed to make informed decisions about loan applications from small local businesses. The committee go on to argue that SMEs must also do more to explore alternative sources of finance to invest in export efforts including non-clearing banks, equity funding and crowd sourcing. They say UKTI must to do more to raise awareness of these sources of alternative funding.
The committee suggest that UKTI do a good job with companies they support but note that awareness of UKTI is low. The report states that UKTI should be required to work with Local Enterprise Partnerships (LEPs) to raise awareness of their services amongst SMEs and the government should consider a specific fund for which LEPs could bid to support SMEs access UKTI services. The committee also say that trade associations, such as the British Chambers of Commerce and the Federation of Small Business, and professional advisers, such as the banks and accountants, have a vital role to play in raising awareness of UKTI’s services.
The Committee also consider the impact of the Bribery Act 2010 in deterring UK exporters. They say the Act has led to confusion and uncertainty and call for detailed post-legislative scrutiny of the Act by a Parliamentary select committee at the earliest opportunity.
Commenting Lord Cope, chairman of the committee, said: “If we are to pay our way in the world in future decades SMEs will play a crucial role. The good news is that our committee were greatly encouraged by the innovation and entrepreneurship we saw and heard about from small business right across the UK. It was clear to us however that many potential exporters did not know what help was available to them and that the Government could do more to assist SMEs in their contribution towards export-led recovery.
“We are calling on UK Trade and Industry and UK Export Finance to blow their own trumpets and promote their services for SMEs. They must work with business organisations, local chambers of commerce, banks and accountancy firms to ensure SMEs who could export know where to get help both in getting started and in building their turnover and profits overseas.
“We also heard that accessing finance to export is a real challenge. We believe banks should allow local managers to make loan decisions to companies they know and work with. The formula based approach, where decisions are made by distant executives and computers, mean banks have lost important local knowledge. UKTI should also do more to help SMEs find alternatives sources of investment when high street banks fail to lend.
“Overall we are optimistic about UK SME exporters. We have the advantages of the English language, of the fact that many of our citizens have links overseas and of a long tradition of trading worldwide. Meanwhile, the Internet is opening up new opportunities all the time. But, despite all that, small businesses need help to export.
“That help is there but not enough SMEs know where to find it.”
The Committee have been inquiring into how the government can support SMEs to generate more export sales. Increasing SME exports is a crucial plank in the government’s plan for the UK to export itself out of the recession.
Areas the report covers include:
- Availability of finance to SMEs wishing to export
- Whether sufficient government support is available to SMEs through organisations such as UK Trade and Investments and UK Export Finance.
- What makes some SMEs more successful exporters than others?
- What more can be done to develop language skills in SMEs to aid exports?
- What has been the impact of recent changes to legislation such as the Bribery Act 2010 and how can SMEs protect their intellectual property rights internationally?
The SME Exports Committee is an ad-hoc committee which was appointed for the current 2012/13 session of Parliament.