Research from DHL Express suggests that the unpredictable economic landscape is driving small and midsize enterprises (SMEs) to adapt and recalibrate their business strategies heading into 2024 to pursue lateral growth opportunities.
“Faced with cost pressures which have placed a strain on profits, SMEs are seeking out solutions to mitigate these challenges. UK SMEs seem to be growing in confidence when it comes to international trade as a way to diversify their revenue streams and thrive in an increasingly competitive market, with 60% planning to grow exports in the next year,” Ian Wilson, Chief Executive at DHL Express UK, said.
READ: Wexco to represent DHL Aviation in Australia and New Zealand
Brexit hurdles
The increased interest in exporting that we’re seeing in UK SMEs has been driven by a combination of both long-term trends and more recent economic challenges. The UK’s departure from the EU has created challenges, obstacles and increased costs for SMEs, and the industry is seeing more small businesses begin to turn to other markets to pursue new opportunities.
The more recent economic challenges seem to have driven further changes – perhaps because SMEs tend to be disproportionately impacted by periods of economic downturn. According to DHL’s research, economic conditions in the UK are a driving force in the decision to export.
“To remain resilient amid high inflation and the cost-of-living crisis, expanding beyond the domestic market is a sound strategy. It opens up new opportunities and reduces risk by ensuring businesses aren’t putting all their eggs in one basket,” Wilson explained.
“Nearly three years on since the Brexit changes to customs requirements, we are still feeling a ripple effect. For example, our research has shown that for some SMEs costs such as custom charges continue to be a barrier, likewise understanding the regulations and customs of each market, and undertaking the paperwork and logistics required to export,” he outlined.
“Working with an expert global partner like DHL Express helps SMEs to navigate many of these challenges, with our business able to offer specialist advice and support, including preparing shipping documentation and calculating duty and tax before moving goods across borders. And we hope to see more trade deals in future that will reduce the financial barrier to exporting,” Wilson added.
READ: Sights set on Southeast Asia’s long-term growth
Target markets
Language and market size always play a significant part in driving export strategy so the top target markets for UK-based SMEs being the US, Singapore and Australia wasn’t hugely surprising. 71% of Australian online shoppers buy cross-border, as do 46% of the 219 million online shoppers in the US, making these markets key targets for UK SMEs.
Many of the barriers for small businesses looking to export can all be greatly reduced or removed by the introduction of Free Trade Agreements (FTAs).
“To both improve prospects for UK businesses and increase the stability of international trade, it’s important we continue to see the development of new trade agreements to ease access and open up new opportunities for growth in key target markets,” Wilson stated.
This is visible in how SMEs exporting to Singapore and Australia are now benefiting from new FTAs with the UK which have reduced barriers through tariff reductions and simplified procedures, making them more attractive, especially for small businesses, where ease of exporting is a major factor.
“In an increasingly digital world, our research found that social commerce is opening doors to international trade. While currently only a small proportion of businesses are selling overseas directly through social commerce platforms, such as Instagram Live Shopping and Tik Tok Shopping, this looks set to grow as overall social commerce is accelerating three times faster than traditional e-commerce. Our research indicates that soon one in four businesses will be leveraging social commerce platforms for global transactions,” Wilson highlighted.
