A new report from international payments company WorldFirst indicates that despite the uncertainty surrounding Brexit, small and medium-sized enterprises (SMEs) in the UK are trading more overseas and have expectations for European export growth.
The Global Trade Barometer, which surveyed more than 1,000 SMEs, highlights that the number of UK businesses trading overseas rose for the first time in a year in the last quarter. In Q2 2018, 32% of SMEs made at least one foreign transaction per month – a 6% increase on Q1.
This rise has been driven by an increase in larger SMEs doing business abroad – among these, more than half (52%) made at least one foreign transaction each month, compared to just 37% in Q1.
The average UK SME made overseas transfers of £47,000 in Q2 and engaged in approximately £84bn worth of global trade over the quarter. This represents almost a 25% increase in average overseas transfer values (£38,000) compared to the same period in 2016.
One of the main focuses of that overseas activity is European business; the continent is heavily represented within the list of countries that have seen the biggest increase in trade activity, with Eastern Europe in particular experiencing a large spike in payments from UK businesses.
Notably, payments from UK businesses to Croatia almost doubled in Q2, with significant increases also seen in transfers to Lithuania and Bulgaria.
Brexit and beyond
The survey also found that SMEs are cautiously optimistic about their international prospects; 29% of respondents expect overseas revenue growth in the next quarter and more than a quarter (27%) are looking to export to a new country in the coming months – a 3% increase from Q1.
Many SMEs foresee continued success in Europe in the immediate future, with 18% looking to enter Western Europe for the first time in the next three months; 11% are focused on Central Europe and one in 10 are considering starting to trade in Eastern Europe.
Businesses have done a good job thus far of carrying on regardless but they can’t do it forever in the face of such political uncertaint
However, despite continued success in the face of a challenging macroeconomic environment, British SMEs are not overlooking the looming threat of Brexit.
Over the last quarter, as government negotiations around what exactly Brexit will look like continued, the number of SMEs who claimed they were not concerned about Brexit having a negative effect on their business fell significantly from 44% to 28% – indicating that legislative uncertainty is a matter of great concern for UK SMEs.
According to Jeremy Thomson-Cook, chief economist at WorldFirst, “After a disappointing 2017 – where the number of businesses trading internationally halved – many have made a return to overseas markets in the last quarter. Over 1.8 million small and medium sized businesses are now doing business abroad.
“However, as we watch and wait for Theresa May and the government to forge a path for the country post-Brexit, SMEs are worried too. Businesses have done a good job thus far of carrying on regardless but they can’t do it forever in the face of such political uncertainty.
“Moving into Q3 and the remainder of the year, it is key that businesses apply a critical eye to their contingency plans and risk management considerations. Protecting effectively against currency volatility is key and businesses would be well minded to carefully consider their hedging strategies across new and existing international markets in the coming months.”