There is much to be done to eliminate the trade deficit but clear ways to make progress
John Winter is the CEO of Barclays Corporate Banking. This is an excerpt from Securing Britain’s Growth, supported by Barclays
MY KEY IDEA
While our culture of innovation in the UK continues to serve us well, as it has for hundreds of years, there is much work to be done if we’re going to eliminate the UK trade deficit. To achieve long-term success, businesses will increasingly need to focus on expansion outside domestic markets. Banks with a presence in multiple countries are well placed to provide financial assistance and support, and to facilitate access to trade corridors.
One of the few certainties in today’s global economic environment is that exports are a powerful driver of economic growth. The UK possesses an impressive array of business advantages, including our language, our rule of law, our time zone, and our historical trading relationships with many other countries around the world.
All these factors contribute to the UK being the sixth-largest exporter in the world. Every day at Barclays we help clients realise their potential in global markets, exporting their goods and services to Europe, the Middle East, Africa, Asia and the Americas.
London is not only one of the world’s most cosmopolitan cities but it also leads the UK as an exporter of services. These include not just finance and insurance, but also culture, recreation and media, as well as a host of other business services such as communications, advertising and professional services. A fifth of global finance and insurance exports, and a tenth of culture and recreation global exports, originate in London and the rest of the UK.
The UK had a strong and improving trade surplus in services of £78bn in 2013, while the trade deficit in manufactured goods is large and deepening (£108bn deficit in 2013). Add them together, and the UK is continually running a trade deficit that may be adversely impacting our GDP growth and overall economic performance.
Improving the UK’s export performance has therefore been a central theme of Her Majesty’s Government, which launched the Export Challenge in 2011. On average, 25% of EU SMEs are involved in exports, whereas in the UK it is only 20%. The government is being extremely pragmatic in its vision for 100,000 more SMEs to join the ranks of exporters.
Such an increase in exporters has the potential to eliminate the UK’s trade deficit and add £30bn to the GDP, something that will benefit everyone in the UK.
A recent report by the think-tank Reform and sponsored by Barclays identified eight key business environment advantages for exporting – labour productivity, innovation, ease of doing business, total tax rate, access to finance, trade and transport infrastructure, openness to trade, and cost to export – and used them to compare the UK against 25 other major exporting countries. It concluded that Britain is world-class in innovation, and that it performs well compared to peers on ease of doing business.
However, both Germany and the USA significantly outperform the UK on workforce productivity, and Britain is now in the middle of the pack on the quality of our ports, road, rail and air infrastructure.
It is clear that while our culture of innovation continues to serve the British well, as it has for hundreds of years, there is much work to be done by many of us, including banks, if we’re going to eliminate the UK trade deficit.
At Barclays, we have made significant strides forward in helping SMEs and larger businesses export more goods and services, including creating specialist teams which support export finance. These teams aren’t only serving experienced exporters, but many first-timers too.
We’re also providing skills seminars for first-time or occasional exporters to help them establish regular trading routes to new markets. Once management of an exporting company has found new customers to buy their products or service overseas, they need to negotiate contracts, manage risks around those contracts and ensure they get paid, all of which is discussed in the seminars.
According to our own research, 30% of businesses look to their bank for assistance when exporting (second only to accountants). Banks can be extremely helpful in offering extensive international know-how and access to trade corridors through networks of proprietary and correspondent banking presence in multiple countries.
We are already seeing the positive results of our efforts. To date we have 15,000 of our small business clients registered for our free Business Abroad service to help them trade across borders.
Over the next few years the UK economy will likely stabilise and grow, even though the global economic picture is far from settled. It is clear from talking to our clients that UK businesses are grappling with this challenge and exploring new markets.
I agree with Lord Livingston, the Minister for Trade and Investment, who recently said: “Mid-sized businesses have the potential to be economic powerhouses for the UK economy, creating jobs and growth for all regions of the UK. Their success is dependent on expanding beyond domestic markets.”
The UK’s businesses have real advantages and are keen to capitalise on them. We are committed to playing a big role in supporting their growth both domestically and abroad. Barclays is very much open to support export-related activities in the UK and around the globe.
John Winter is the CEO of Barclays Corporate Banking. This is an excerpt from Securing Britain’s Growth, supported by Barclays
NOW READ:
Leave a Comment