CBI calls for new tax break to help SME exporters

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Although the UK is making progress in the fast-growing economies of Asia and Latin America – specifically the BRICs (Brazil, Russia, India and China) – it still lags behind some of its international rivals. Only this week, official trade figures showed that the UK’s deficit on trade in goods and services was £3.6 billion in February, the largest in six months.

In a new report, ‘The Only Way is Exports: renewing the UK’s role as a trading nation’, the CBI says growing mid-sized companies with the potential to enter new markets must be at the forefront of any export-led recovery. But it warns too many businesses are impeded by the perceived risks and costs of exploring new overseas markets, with only one fifth of the UK’s SMEs exporting, compared with a quarter across the European Union.

John Cridland, CBI Director-General, said: “Global trade has been one of the bedrocks of UK economic strength but to cement our position as a leading exporting nation in the future we need more active Government support.

“While we are making progress in some fast-growing markets, weaker than expected economic growth in our major trading partners has held us back. We also have a heavy dependence on imports: ships are arriving in UK ports bringing in more goods than they take back.

“The growing middle classes of Asia and Latin America want to purchase leading UK branded goods and services, so there is every reason for the UK to be confident as long as businesses continue to make headway.

On export performance being embedded in all government sector strategies, Cridland, said: “To lift exports, business and government must build on those sectors where we excel, such as automotives and public services, as part of a wider industrial strategy.

On a new tax credit for SME exporters: “Breaking into new markets can be a huge leap for small and medium firms, which is why we’re calling on the Government to introduce a new tax credit to help them get a foothold internationally.

On access to export finance schemes:“Export finance schemes will be fundamental to success, so the Government must rapidly deliver on their existing plans and make it easier for companies to participate.”

Exports to high-growth markets have grown strongly since 2008, with the value of total UK exports to the BRICs rising by 42% between then and 2011. But the UK is starting from a low base.

Furthermore, despite the depreciation in sterling and the comparative advantages the UK has in some sectors – the UK enjoys a surplus in services trade – export performance has not been as strong as might be expected. In 2011, the UK’s goods exports to the BRICs were just 5 per cent of its total goods exports, compared with higher proportions for other major exporters – notably Germany  and the US.

The UK has persistently run a trade deficit since 1998, and its share of global exports fell to just 3.4% in 2011, almost half that of 1980. And according to the OBR’s latest forecasts, net trade will only contribute 0.1 percentage points to GDP growth in each of the next five years.

The CBI’s 11 recommendations to boost export performance are:

Businesses must match capabilities to changing demand

1): Businesses and trade associations should take targeted action to strengthen domestic supply chains, invest and build key capabilities for the future

Putting exports at the heart of industrial strategy

2): Plans to boost export performance in emerging markets must be embedded in all government strategies for sectors

3): The Davies Commission must deliver a strategy for the short, medium and long term to boost capacity and promote investment in connectivity across the UK

4): The Government must work with industry on the review of the current night flights regime to ensure it carefully considers the needs of the air freight sector and its delivery cycles in the future

5): The Government should ensure that the EU uses its economic weight to press for robust IP protection provisions in international trade negotiations. This requires active UK engagement on IP initiatives in Europe

6): The UK needs to develop a reputation for being open to top talent, by streamlining processes and setting out which key markets are to have premium visa services

7): The Government should review the impact of the Bribery Act on competitiveness, with a particular focus on small and medium-sized enterprises

Setting the right resourcing framework

8): Prioritise increasing awareness of UKTI and UK Export Finance, with particular attention paid to communication with SMEs

9): To support high growth export champions, the government should introduce a New Markets Incentive – a targeted tax credit to underpin exploratory export activity by SMEs

10): The Government must urgently deliver and intensively market the UK Export Finance direct lending facility

11): Incorporating export finance schemes in to the planned Business Bank will create a ‘one stop shop’ for business finance

You can read the whole ‘The Only Way is Exports: renewing the UK’s role as a trading nation’ report HERE

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