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roundtable: international trade
truly successful the key will be getting the new service used all the way down to SMEs. That’s going to be a challenge and I believe the banks will need to help facilitate.”
“It will give exporters a lot more confidence that they will be paid, and banks the opportunity to finance exports seamlessly. I see it being absolutely fantastic for trading businesses, providing the technology can be rolled out successfully across the world. That’s the challenge for SWIFT.”
Julian Grazebrook
The bureaucratic brake on international business
Morrison: “Every time a politician stands up and says we will cut red-tape and bureaucracy, it seems that we end up with more. Until we get a system that makes it easier for businesses to operate in whatever field or business climate they wish to, we are never going to be as successful as we could be.”
He exampled ABP’s five-year struggle against red- tape and bureaucracy to get permission to invest £150m of private sector money into the Port of Southampton. “It’s counter-intuitive to everything that business wants and needs to do.”
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issue with the LoC, an expiry date or perhaps even the spelling of words and use that as a basis for renegotiation.”
Squibb confirmed seeing significant outsourcing over the last 3-4 years, often irrespective of the size of firms. “Outsourcers need to consider the impact on financing when outsourcing, as longer lead times and shipping periods can dramatically increase the amount of working capital required. Many customers use LoCs as part of the overall solution but this is by no means the only way of financing this aspect of their business.”
Clarke said Lloyds Bank had taken a conscious decision not to outsource or offshore its own front line operations, seeing them as key parts of its banking service value-chain.
A SWIFT solution that could take 15 years . . .
Squibb said there were moves to improve long standing Letter of Credit procedures with an electronic Bankers’ Payment Obligation befitting the 21st century business world, but it could still take many years for the service to be fully introduced. “The new system is in its very early days. It sits on the interbank platform called SWIFT (Society for Worldwide Interbank Financial Telecommunication) and late last year SWIFT joined forces with the International Chamber of Commerce to start writing the new BPO rules. The technology and concept sounds great but to be
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Major investors were global players, Morrison added, and UK bureaucratic difficulties were simply another reason for them to choose to invest elsewhere in the world. “We have to get regulation right, or we won’t get the level of investment that we need in this country.”
Pope suggested that the delays experienced by APB Southampton Port in getting permission to expand were very similar to the current capacity problems besetting the South East’s Airports. What was needed was a new runway at Heathrow, another new runway at Gatwick and a third new runway at Stansted – with that the job would be done, no need for imaginary projects in the Thames Estuary.
Planning permissions, employment legislation, and the no-win no-fee compensation culture, all came in for strong Roundtable criticism – largely for the excessive time and costs involved for businesses in dealing with such matters.
Morrison: “I think it is incumbent on everyone, particularly government organisations, to make it easier for businesses to operate in this country. The climate is almost anti-business. They say the recovery has to be business led; surely by making legislation and red-tape less onerous on businesses you would see a pick up in growth.”
Pereira mentioned that the UK is actually seventh in the world for ease in doing business.”
It wasn’t said, but the answering Roundtable murmur translated as: ‘It doesn’t feel like it!’
Is ‘Britishness’ the key to export growth?
“Yes!” said Grazebrook. “Quality and Britain are generally perceived as one and the same. In Russia they love British goods.”
Pereira agreed: “The problem we get is with British business confidence, yet invariably when companies actually get out to trade shows in other countries, their products are well received and they are successful.”
Grazebrook noted that in the 18th-19th centuries “every self-respecting Englishman wanted to go out and do things overseas, now we seem to lack that adventurous spirit.”
Pope: “Every exporter should ask themselves one question: ‘Why do your current export customers buy from you?’ In our case, it’s because we trust them to pay us. We don’t go with Letters of Credit. It requires you to know your customers, to meet them and understand the risks. It’s about building a relationship, and that’s perhaps why we are cautious about going further afield to places like Cuba or Venezuela.”
Parsons mentioned the assistance of shelf life and durability to the exporting of certain products. UK products, for example, could be shipped to the Far East where larger margins were gained. Western owners wanted the latest models and changed their cars more frequently, but the model-lifespan was often longer in other countries.
Morrison pointed out that our ‘Britishness’ didn’t help when it came to playing by the rules. “The EU put down new rules and regulations and in Britain we adhere to every rule, tick every box, and then we gold-plate it. In other EU countries they find ways around the rules so they work in their favour.”
And despite EU aims, regulations and penalties, things just don’t change in those countries, added Parsons.
Final thoughts on beneficial change
Squibb felt there had been a paradigm shift in government financial support for exporting business. “There is definitely more access to finance and greater collaboration about finding the right business solutions.”
Grazebrook said low exchange rates helped British exporters, although he admitted that they would and probably could not be controlled by our government. And the result would be increased cost of imports and likely inflationary pressures, which brought its’ own issues. However, incentives for smaller companies which currently did not export, most likely through reduced taxation on their incremental profits or turnover, was not an unfeasible option
Pereira reminded the Roundtable that the government already provided incentives through heavily subsidised trade show access around the world, travel grants, and match-funding for certain export-linked activities.
Grazebrook: “That’s all slightly short-term. You need a mindshift of the SME who has never exported before. It’s not just about visiting trade shows, but why they should dramatically change their business operations, what should their strategy be to reach export markets.”
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – NOVEMBER 2012
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