The UK’s manufacturing SMEs need fresh financial support and new software tools to scale up their exports, a new Make UK report has argued this week (4 March).
While two in three UK smaller manufacturing firms want to grow into larger businesses within the next five to 10 years, they face challenges on skills, export finance and accessing the funding they need to reach the next stage of that growth.
Export support
Only around one in five (22%) of UK manufacturing firms surveyed for the report currently sell their goods overseas, yet manufacturing is still the sector with the second-highest proportion of exporters.
Currently, 38% of SMEs in the sector focus primarily on product diversification as a way of entering a new market, reflecting “the need to understand local markets and create products/services that fit into a foreign market’s existing regulations/standards” as well as consumer tastes in different regions.
Other strategies for boosting these exports included “targeted support” to make the most of e-commerce platforms, which the report argues could “bridge the gap” for firms looking to export for the first time.
Finance
There is also a need for direct export finance support for the UK’s manufacturing SMEs, the report says – a need that it says can be met with the development of a new Export Development Grant Scheme similar to Australia’s equivalent programme.
The current provision of export finance to these firms should also be expanded, it argues, “to provide a full coverage model that, alongside financial support, delivers advisory services when trading with new markets”.
The Chartered Institute of Export & International Trade is among the organisations providing would-be and existing exporters with comprehensive advisory services in trade, which can be accessed here.
US example
The report also argues that the UK can learn from the approach of the US in supporting manufacturing SMEs to grow through exports with a “more localised approach”.
The Small Business Administration in the US works with the country’s financial institutions to provide “microloans, innovation research grants, and export finance programs” at a local level via ‘export finance managers’ based in each state.
Taking this kind of regional approach, the report’s authors say, could help UK SMEs to build their goods exports.
Conference reflections
Chartered Institute manufacturing lead Paul Brooks was at this week’s Make UK conference, where the report was launched.
He notes that the conference came hot on the heels of the government’s announcement that it would be developing a new hub to provide SMEs “with better access to the defence supply chain” following its commitment to spending 2.5% of GDP on defence.
However, there are challenges:
"There aren’t that many smaller businesses already in the UK defence supply chain and Rachel Reeves said that the government is going to make it easier for UK SMEs to win defence contracts. This could be a difficult thing to make happen in practice."
“However, I was talking to several automotive and aerospace supply chain businesses [at the conference], who are SMEs, and they said it would take two or three years to transition into defence, getting the right accreditations and retooling."
“With more tangible support, however, it’s clearly possible to get more SMEs active in the defence supply chain. While it can be challenging, the new hub is a step in the right direction on offering them this help."
