UK small businesses struggling to take advantage of trade deals

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Britain’s small businesses are struggling to take advantage of the UK government’s new trade deals, with a majority reporting flat or declining exports in the third quarter of this year, a survey by the UK’s largest business lobby group has found.

The disappointing performance of smaller exporters was blamed on post-Brexit red tape and US President Donald Trump’s punitive trade policies, leading to calls from the British Chambers of Commerce for the government to do more to help small and medium-sized enterprises. 

William Bain, head of trade policy at the BCC, said the survey findings — published ahead of the government’s International Trade Week starting on Monday — were “deeply concerning”, citing BCC analysis showing a 2 per cent increase in UK exports would increase long-run UK GDP growth by 0.6 per cent.  

The survey of 4,600 mostly small companies by the BCC’s Insights Unit found that 84 per cent businesses with fewer than 10 employees reported flat or falling export orders in the third quarter of this year.

Larger businesses with 250 or more employers performed better, with 42 per cent reporting rising export orders. But overall the survey found that “sentiment among all exporters remains weak”, with less than 25 per cent reporting rising export sales or orders in the third quarter. 

Bain added that while the BCC welcomed the positive outcomes of UK government trade negotiations with the US, EU and India in recent months, the new deals were only as good as companies’ ability to make use of them.

 “As these deals and strategies are implemented, new smaller exporters need greater help to fully reap the benefits,” he said.

The BCC’s calls for more support ahead of the Budget later this month come as the Department for Business and Trade is cutting staff. UK trade minister Sir Chris Bryant told the Financial Times that the UK government was making 20 per cent efficiency savings, including cuts to export promotion teams.

Three industry insiders told the FT that DBT’s network of regional advisers offering small businesses advice on trade matters was also being pared back, including being told only to hold meetings online, rather than face to face, to cut costs.

“Morale in the department is very low,” one added.

The WTO warned in an assessment of UK trade policy last week that the UK trade contribution to GDP growth had “stagnated” since the pandemic, citing a study that found exports to the EU from UK-based SMEs fell 30 per cent after Brexit, with 16,400 small firms ceasing EU exports altogether.

The government has pledged to boost trade but respondents to the BCC survey reported they were still battling post-Brexit bureaucracy, Trump’s tariffs and a decision by the US to end a tariff exemption for consignments under $800 dollars.

The manager of a small services firm in the west of England with fewer than 10 employees told the survey: “I’m not confident as the ability to trade with Europe is very difficult so we lost our markets due to Brexit, and our ability to trade with the US is very hard and expensive due to tariffs and business uncertainty.”

Chris Southworth, secretary-general of the UK branch of the International Chamber of Commerce, urged the government to speed up moves to digitise trade.

“Smaller firms continue to face structural barriers that hold back growth, particularly with EU trade,” he said. “Chief among them is the antiquated trade bureaucracy that followed our exit from the EU and access to cheaper trade finance, both of which have disproportionately impacted SMEs.”

DBT said it was seeking to boost UK exports via trade deals and had increased the lending capacity of UK Export Finance — which provides financial support to exporting SMEs — by £20bn to £80bn as part of the trade strategy.

“We agree that boosting exports is great for productivity, jobs and economic growth,” Bryant said in a statement, adding that International Trade Week was designed to get more firms “seizing the opportunity to sell their goods and services around the world”.