roundtable: international trade
(and not just money) to build a network in these countries can be considerable, particularly if you are unaware of support from the likes of UKTI.”
Wright also feared increased protectionism, In the USA government spending cuts, increased tax and regulatory difficulties will create issues for UK exporters. “I see them going into an isolationism- type market and I think UK export businesses focusing solely on the US are in for a hard time.”
Whittle: “The regulation to move goods around the world, the expertise needed, and the liability on exporters is increasing day by day. It’s one reason people don’t export, deciding instead to concentrate on their core home activities. But, looked at another way, if less people are doing it, it’s a business opportunity.”
Parsons agreed that dealing with foreign banks, letters of credit, freight-handling and so on could be “a scary thing” for novice exporters, but so were the practical difficulties of language and travel distances and durations. Europe was quicker to get to than the Far East; the US easier to talk to than other countries. “But people do export very successfully, and we (PSP) wouldn’t be in business if they didn’t.”
Pereira stressed that UKTI is doing much more work now with banks, accountants and professional services to ease British exporting difficulties.
Parsons: “To have local assistance like that to help sell a British product is great.”
Grazebrook highlighted the need to have reputable agents abroad to accompany British exporters – an area where LEPs and UKTI could definitely help boost exporting confidence. He mentioned “the frightening markets of the 1990s in Russia and South America.” They are risky places but well worth it when you are into them, but you need established roots, trustworthy local partners, people who understand how local business works.”
Are there payment and cash transfer problems?
It is mainly a combination of exchange control regulations and understanding payment terms said Clarke. “You have to build freight travel times, regulatory procedures and foreign exchange variations into your cashflow, or you can get caught out.”
Complacency was a latent risk with foreign exchange rates being relatively stable over the past two years. “So there is payment risk and exchange risk.”
The Roundtable gave examples of businesses suffering from foreign exchange market fluctuations. “Exchange rates can win or lose you the profit margin game, and sometimes you just have tell your client that the price has gone up,” said Parsons.
Grazebrook said his company had put financial hedges in place to overcome euro exchange risks. It was essential for finance directors to understand the benefits (and risks) of hedging. If the price that customers are willing to pay for your goods is eroded by 40% due to the effects of exchange
fluctuations, and you have done nothing about it, you have only yourself to blame!
Clarke praised the assuring assistance of the Government’s ongoing Export Credits Guarantee Department, now operating under the UK Export Finance banner.
Pereira explained that UK Export Finance was still highly active and UKTI South East had just recruited a finance specialist to assist businesses in de-risking their foreign trading.
Clarke: “If we can get a higher proportion of businesses exporting with confidence, it won’t take long to make a beneficial impact on the UK economy.”
The recently launched UK Export Finance schemes will help level the playing field for British exporters, said Squibb. When a good proposition comes forward, the Government backed schemes can be a key factor in financing or supporting the overseas sale. The range of schemes now covers contract guarantees, export finance, credit insurance and financing end-buyers. ”This is absolutely moving in the right direction for a UK exporter to be able to tell a buyer that his bank can help provide finance to help them buy their goods.”
Eurozone concerns
Clarke: “It’s been going on so long that it almost feels there’s a steady state, and my mid-market trading customers are more confident they can deal with it. Certainly, many businesses are almost insulating themselves against eurozone problems by just not going there, and many are refocusing on more stable markets.”
“The Government says the way to break out of this flat market period is through exports. That’s fine, if you have a product and capability to export and a market that wants to buy it. International trade is currently a supply v demand debate waiting for the world to become a consumer again.”
“There are shining lights in high-end manufacturing that are starting to show real signs of growth, but the major challenge is trying to find the right skilled labour.”
Pereira confirmed that the US is still by far Britain’s No 1 market, but despite eurozone concerns “a lot of business is still going on there. We still export more to Ireland than India, which is crazy, but, on the other hand, so perhaps is poorly informed exporters going to Brazil.”
No-one wanted to envisage the dire outcomes if the Eurozone imploded.
Shortsighted cost savings in the back-offices
Whittle raised the concern of de-skilling within ‘back-offices’ of international trading companies. “There used to be export or import teams within companies, local clerks with specialist credit expertise for example, but, with the general scaling back in industry, these functions have largely been
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – NOVEMBER 2012 Doug Morrison
outsourced.” Now, a nervousness has arisen within companies who feel beholden to the outsourcers. Companies don’t seem to know what they want, or how to do it. They lack internal market experience.
Parsons: “Ten years ago most companies had an export manager. Now the person handling exports is usually someone in the accounts department, and that’s probably why some markets are struggling, because the expertise is not there. That expertise has been viewed by companies as an expensive resource they can do without, but that’s a shortsighted saving.”
Grazebrook highlighted the expertise required when dealing with the intricacies of export finance such as Letters of Credit and performance guarantees. “The Chinese and Japanese in the 80’s, for example, were regularly trying to renegotiating prices when it suited them. They used to find some
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www.businessmag.co.uk Rory Pereira Gary Whittle
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