Irrespective of Brexit, we must support our middle industry

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Irrespective of Brexit, we must support our middle industry

Whatever the outcome of the Brexit negotiations, the Government needs to make sure it supports Britain’s mid-sized exporting businesses – the UK’s Mittelstand, says Sebastien Kurzel.

The Brexit negotiations are moving into the second phase. Whatever the outcome, the Government needs to make sure it supports Britain’s mid-sized exporting businesses – the UK’s Mittelstand. As a country, our Government spends a significant amount of time and resource supporting multinationals and start-ups, which is important, of course. But it needs to invest the same amount of energy in supporting our home-grown exporting successes.

There is a misconception that the UK is a trade black hole; that except for cars, plane parts and medicines, we’re poor exporters; a country whose businesses don’t know how to trade, and that without an EU deal that includes Single Market access we’re all sunk. So, now seems like the right time to point out that we are, in fact, already one of the world’s great exporters of everything from beer and salmon to concert pianos and catering equipment and leaving the EU will not change that.

It is often said that we import more goods than we export to EU countries. But as soon as you look outside this bubble the story changes dramatically. The UK has a trade surplus with more than 60 countries including the United Arab Emirates, Saudi Arabia, Australia and Brazil.

According to the Office for National Statistics, in 2016 the UK exported more to the rest of the world than to Europe including goods worth £99bn to the USA (our top trade global partner), £16.8bn to China and £12.5bn to Japan. Exports to the US in 2016 were worth more than twice as much as exports to any other country.

So, who is doing all this non-EU exporting? And why are we having such great success outside the EU? Clearly, Britain is home to many global companies with a track record of successful exports stretching back many decades. Manufacturers such as Unilever and GlaxoSmithKline make up a chunk of our export figures. As do vehicle manufactures and our aerospace sector.

But they don’t account for the lot by any means.

In fact, a large contributor to our trade figures are mid-sized, home-grown exporting businesses. Take Yorkshire Pianos, a small business established in 2014. Through sheer hard work, determination and the ability to seize every opportunity, this small manufacture in the Yorkshire Dales, now has a £1.75m contract to export 500 of their top-of-the-range Cavendish pianos to China over the next five years.

At the bigger end of the scale we have folding-bicycle manufacturer Brompton, which has been one of the UK’s greatest success stories over the last few years. According to a recent report in The FT, “the brand has become a symbol of British engineering success and the company now exports more than 70 per cent of its bikes.” Or take catering supplier Nisbets, headquartered in Bristol and founded by Andrew Nisbet. It now ships to more than 100 countries worldwide, has offices across Europe, and stores across Australia too. It also won The Queen’s Award for Enterprise in International Trade in 2017.

These companies often take advantage of the strength of the British brand abroad, especially in the emerging markets like India and China, and Commonwealth countries such as Australia, Canada, and Hong Kong. For example, in August, the UK signed a deal worth £200m to export pork products to China, and Scottish salmon exports are booming with the second-quarter growth in exports to Taiwan and Japan accounting for just under £9m. There are similar stories to be told about Scotch whiskey and British fashion.

As minds turn to Brexit, these mid-sized companies should be supported in their expansion efforts. But, if you look at the statistics, many smaller mid-sized companies who want to export to rest of the world are not being properly supported.

The key issue is access to finance. Many UK businesses with the appetite to export cannot get the necessary funding from banks to support their growth plans and ambitions. This is where the Government needs to step in. The Government makes a lot of its ‘Help to Grow’ scheme, which has the capacity to support 500 firms a year with up to £2m. It also touts its Business Growth Fund, which offers investments of £2m to £10m for up to 10 years.

But while these schemes are a good start, they pale in comparison to the amount and depth of support provided by the Germen Government to their mid-sized companies. Since WWII, the KfW Development Bank, Germany’s support vehicle for SMEs and mid-sized firms, has loaned more than €1.3trn to various business and societal causes. This is the type of support that the UK Government needs to commit to if our own companies are going to take full advantage of Brexit.

The important thing is that these companies have the appetite; they just need the support, guidance and capital. Millennials are embracing the opportunities of Brexit. Seventy per cent of decision makers aged between 18 and 30 believe their business will be better off after Brexit and a whopping 80 per cent believe that when it comes to an EU trade deal, “no deal is better than a bad deal”. Interestingly, small businesses run by millennials more global than any other age group. Ninety per cent feel confident about doing business abroad and just seven per cent don’t currently do business overseas.

As we go into a 12-month argument and debate about trade, it is worth remembering that some of our biggest exporters are our mid-sized firms – the British Mittelstand. If we want them to step up and into the breach to increase their exports and trade around the world, the Government need to make sure that it is giving them the necessary support. Access to finance would be a good start.

 

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  • Sebastien Kurzel
    Sebastien Kurzel
    Sebastien Kurzel is a Masters student at LSE, and previously studied geology. He is interested in the interface between energy sources, geopolitics, and UK national security.
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