Small Business Exports

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Motion made, and Question proposed, That this House do now adjourn.—(Iain Stewart.)

Photo of Jack Brereton Jack Brereton Conservative, Stoke-on-Trent South 8:29 pm, 20th March 2019

What I want to explore in this debate is how, where and with what resources the Department for International Trade is taking action to connect businesses, especially small businesses, with the Government’s export strategy. Small businesses account for more than 99% of UK private sector businesses; there are some 5.6 million of them. These are the innovators, and they have huge potential to export more, but not enough of them export outside the UK. The Federation of Small Businesses reckons that only about a fifth of its members are exporters, despite the expertise on offer from the FSB itself. One thing that has struck me is that a great deal of information, advice and assistance is available to potential exporters but the question remains: how can we ensure it is hitting home? How can we persuade and facilitate more small businesses to become exporters?

I welcome the announcement in last week’s spring statement that UK Export Finance will introduce a new general export facility and launch a consultation on UK Export Finance’s foreign content policy. It will be encouraging to small business that the proposed changes will recognise the full contribution of the UK supply chain and that a wider range of exporters will gain access to UK Export Finance support, but I hope the Treasury will look even more favourably on the Department for International Trade at the next spending review. It is vital that the resources are there to engage the local businesses of global Britain in the dynamic potential of the United Kingdom to be a great trading nation of the 21st century outside the EU.

The rewards from increasing our export success are such that a bit more spending—rigorously targeted, of course—will soon more than pay for itself through duties if more firms become confident exporters.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Human Rights), Shadow DUP Spokesperson (Health)

I spoke to the hon. Gentleman beforehand to clarify the matter that I have a deep concern about—indeed, the Minister is probably aware of it as well. I have major issues with the changes for those exporting their goods to Europe and globally, because of the lack of clarity over food stamping and packaging and whether things can be accepted with dual stamps. That affects not only the export businesses but the packaging companies in my constituency, which have not received orders from local businesses and will not be able to process the huge order that will be coming when clarity eventually arrives. The Department of Agriculture, Environment and Rural Affairs and Department for Environment, Food and Rural Affairs do not seem to have got their act together on this yet. Does the hon. Gentleman agree that this lack of clarity affects not simply export businesses, but the subsidiary businesses, such as the packaging firm in my constituency that depends on them? This must be seen as a departmental priority.

Photo of Jack Brereton Jack Brereton Conservative, Stoke-on-Trent South

I thank the hon. Gentleman for the points he has made, and I know the Department will be looking into these issues.

It is essential that we seek to open markets up, and the ambitious free trade agreements that the Department for International Trade will deliver are a key part of that. Indeed, what would be the point of delivering those free trade agreements if we did not have exporters eager to target and take advantage of them? I have read the Government’s export strategy, which is an excellent and comprehensive document—one that I am sure will be drawn on in the Minister’s reply, to the benefit of the House. It would be helpful for there to be an MP’s guide to signposting business to export support programmes, because that is certainly an issue that all colleagues will be keen to engage with at a constituency level.

Photo of Gareth Snell Gareth Snell Labour/Co-operative, Stoke-on-Trent Central

I thank the hon. Gentleman for securing this debate. Like him, I understand the nature of exports, particularly in respect of cities such as Stoke-on-Trent. On the point about MPs’ support, will he join me in congratulating the Staffordshire chamber of commerce on the work it does through its export surgeries, where it helps businesses with the import and export paperwork and walks them through, step by step, with a hand-holding exercise that allows them to open up their own domestic products to the global market?

Photo of Jack Brereton Jack Brereton Conservative, Stoke-on-Trent South

I thank my parliamentary neighbour for making that point. He is absolutely right about Staffordshire chamber of commerce, which offers some incredible, fantastic services for local businesses in Stoke-on-Trent and Staffordshire more widely. Many businesses would not be able to go without those services.

The strategy to which I just referred is subtitled “supporting and connecting businesses to grow on the world stage”. I am confident that that is the right ambition, and one challenge for us all in this House will be to ensure that our local businesses are connected to it. The Government promise that they will

“encourage and inspire businesses that can export but have not started or are just beginning;
placing a particular focus on peer-to-peer learning…inform businesses by providing information, advice and practical assistance on exporting…connect UK businesses to overseas buyers, markets and each other, using our sector expertise and our networks in the UK and overseas” and, finally,

“place finance at the heart of our offer”.

That is a positive statement to read, and it is in that spirit of positive engagement that I want to raise generally the remaining barriers to small-business exports.

Photo of Craig Mackinlay Craig Mackinlay Conservative, South Thanet

My hon. Friend talks about a spirit of working together; has he considered whether the good plan for the future that the Department for International Trade is pursuing should include the opportunity for increased exports to our close Commonwealth friends and neighbours? That trade can work both ways. Those countries are growing markets with a third of the world’s population, and they are where Britain should be looking for reciprocal trade.

Photo of Jack Brereton Jack Brereton Conservative, Stoke-on-Trent South

My hon. Friend is absolutely right that we need to strengthen those links with Commonwealth countries around the world. It is important that we support those strong growing markets, in which we can trade more of the fantastic products that we make right up and down this country, especially those products made in cities like Stoke-on-Trent.

As a city we are proud of the world-class goods that we make, most famously in the ceramics industry, of course, but also in many other areas of contemporary manufacturing, from the traditional toffees of Walker’s Nonsuch in my constituency, to the cutting-edge technology of Goodwin International. They are UK export success stories. I know from Walker’s that the increase in the capital allowance to £1 million has been vital to the affordability of investment in its factory and in the latest industrial capital goods that it wants to produce.

Let me turn to the small businesses that are not engaged either in exporting or in the programmes available to encourage and help them. The Federation of Small Businesses has on its website an eye-opening article, “Breaking New Ground”, which explores what is holding back potential exporters and, crucially, what they are missing out on. It quotes a report by WorldFirst that found that the typical UK small business exporter generates more than £287,000 per year from exports. It further notes research by the Chartered Institute of Marketing and PricewaterhouseCoopers that found that of those small firms currently exporting, 70% expect to increase exports over the next three years.

Despite the evident value in exporting, less than a fifth of British small firms export anything. Why? According to the CIM and PWC study, 33% lack the confidence to approach new markets, while many see it as too great a challenge. Sixty-nine per cent. of small companies reported significant hurdles to exporting in the 2017 Hitachi Capital British business barometer. The key barriers identified in the FSB article are: insufficient resources, whether staff, time, cash or product; unfamiliar local customs, culture and language; shipping issues; handling, clearing and agency charges; exchange rate fluctuations; legislative difficulties overseas; opaque international tax rules; uncertain immigration employment laws; certificates of origin; and other red-tape issues. As Peter Sewell, regional director at Crown World Mobility, puts it:

“Understanding it all takes more than a Google search.”

It is easy to see how, for sole traders and small partnerships, exporting might be daunting even to consider. Larger companies have the capacity to employ staff in export markets, and if based in the region, they can better overcome many of the challenges I have listed. For smaller companies, though, that is often just not possible and would amount to a significant proportion of their revenues.

I wish to highlight some specific issues that were raised with me on visits to local businesses in Stoke-on-Trent. I have already mentioned Staffordshire chamber of commerce, the local exports team of which, under Rob Lawley, does a great job, and Stoke-on-Trent is one of the cities that is on the up. When it comes to exports, however, the city continues to underperform against midlands cities of comparable size, such as Coventry. That is, I think, a product of Stoke-on-Trent’s business base being far more reliant on small enterprises, and it means that the local team needs more resources to keep the momentum up and fully realise our potential.

We also have unique and specialist sectors, most importantly our ceramics industry. The British Ceramic Confederation is very keen to see a Department for International Trade ceramics expert based in Stoke-on-Trent to meet the very specific needs of the industry. Preferably, they would be based at the new ceramic research park that we hope to see developed as part of the sector deal that the ceramics industry is pursuing with the Department for Business, Energy and Industrial Strategy.

I know that the Department is well versed in the issues facing the ceramics industry after Brexit and the need to continue combating unfair trade practices from countries that do not respect the rules-based international trade system. Indeed, the Minister of State for Trade Policy was a very welcome guest to a roundtable that I hosted recently with local ceramics firms at Valentine Clays in Stoke-on-Trent South. I am also pleased to report that Heraldic Pottery, which he also visited on his trip to Stoke-on-Trent, has expanded further by buying the significant and historic Duchess China Works in Longton in a supply-chain takeover.

Ceramics is undergoing a hugely welcome renaissance in its authentic home of the Potteries, and the export success for businesses large and small will add to the mood of economic optimism in the city. The touring exports hub that joined the Minister on his visit to Valentine Clays is an important part of the engagement that business needs.

I am delighted that the Department has listened to the concerns that I and others have raised about the need to continue anti-dumping measures post Brexit. Most recently, the Secretary of State confirmed that measures to prevent unfair dumping practices that threaten our ceramics industry from artificially cheap imports would be rolled over when we leave the EU. It is also incredibly reassuring for the industry that, under a no-deal Brexit, tariffs would continue to apply to certain ceramic products.

It is essential that, as a Government, we continue to champion measures that support smaller businesses to create more job opportunities, particularly more skilled jobs, which attract a higher salary. In January, the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend Kelly Tolhurst, joined me on a visit to Park Hall Business Village. The village, which has expanded in phases, currently now houses more than 100 small businesses, employs more than 1,000 people and occupies over 250,000 square feet of commercial space. It verifies the growing economic success that has been seen and has increased the demand for additional commercial space. There we met: Deck Joint Ltd, which engineers and manufactures “leave in place” formwork for the construction industry; Eden Holistic Pet Foods, a rapidly growing business that supplies grain and gluten-free pet foods; and Fifteen Group, which provides IT services. We have many other smaller businesses that are expanding and have huge potential to export more of their products and services.

One of the issues that is raised most often with me locally is the need to widen awareness of the export finance that is available. Far too few have a good awareness of the support available to finance growing exports or enter new markets. It can sometimes come as a pleasant surprise to small businesses when they find out quite how supportive the Government are in de-risking the considerable financial outlay for first-time exporters—though, of course, more resources, more reliefs and so on will always be welcome in persuading small businesses to take that final step into being an export supplier, especially of goods and services, which are more complicated in their logistics than putting a parcel in the mail after an order on the internet.

Plenty of advice and information is available to small businesses that are looking to export. A great deal of it is free of charge or comes in premium form with membership of one of the trade groups or small business forums that do such excellent work. What I ask of the Government is that the exports strategy be fully resourced to maximise its positive effect. Global Britain’s success will be built on the success of local businesses, many of which have never exported before. Crucially, we need to have increased expert support in export markets to allow small businesses to penetrate those markets. I hope that those small businesses in particular will be the focus of the Government’s efforts to support and connect businesses to grow on the world stage.

Photo of Graham Stuart Graham Stuart Parliamentary Under-Secretary (Department for International Trade) 8:44 pm, 20th March 2019

I congratulate my hon. Friend on securing this important debate on how, where and with what resources the Department for International Trade is supporting exports from small and medium-sized businesses. My hon. Friend is a remarkably energetic, knowledgeable, relentless and effective MP in championing the economic interests of his constituents. No one does more than he does to promote Stoke, and the jobs and businesses on which its prosperity depends. Like my hon. Friend, I have read the Federation of Small Businesses’ paper, “Breaking New Ground”. The FSB plays an important role in encouraging more SMEs to export, and its analysis identifies the barriers that we, in conjunction with trade bodies, are seeking to help SMEs overcome.

My hon. Friend asks how we can persuade and facilitate more small businesses to export. That is a great question, but before I attempt to answer it, let me update the House on this country’s export performance. The Government believe in the benefits of business, trade and exports. Exporting builds economic resilience and provides higher-skilled, higher-paid jobs, as my hon. Friend rightly says. It raises the average profitability, productivity and tax contributions of companies that do it. Exporting is at the heart of this Government’s mission to build a more prosperous, stronger, fairer and truly global Britain. Exports underpin the UK’s economic transformation since 2010, and account for a major part of the UK’s productivity growth.

In the year to January 2019, exports grew to £636 billion—up 42% since the Labour party were sitting on the Government side of the House, although the Opposition Benches are empty tonight. The record employment statistics of the last few days show how potters in Stoke and residents everywhere have benefited from a Government who put wealth creation, not class warfare, at the heart of their policies. My Department has only existed since 2016, but it has played its part in that success story—not least, I am pleased to say, in the midlands. For instance, DIT’s global growth service is working with Stoke-based wholesaler Nemesis Now, and UK Export Finance is seeking to reinforce the success of Ceramic Drying Systems. Another example is that of Mantec Technical Ceramics, which the Department has helped on its journey to understand opportunities in Vietnam, including taking the company on a group market visit. The Department has assisted tens of thousands of companies like these to fulfil their global exporting ambitions across the country.

We do not just support exports from Stoke; we also support foreign direct investment into Stoke and the rest of the UK. This has included involvement with the majority of foreign direct investment projects, which in total created 76,000 jobs in 2017-18, amounting to nearly 1,500 new jobs per week across the country. But we need to go further. The latest figures from the Office for National Statistics show that 232,400 SMEs exported in 2017, which is an increase of 6.7% over the previous year. It is progress, but this represented just 9.8%—less than a tenth—of all SMEs. In fact, a DIT survey in 2017 found that 19% of all registered businesses—516,000—could be exporting, but are not. In other words, there are more companies who think that they could be exporting than there are that currently can and do.

The International Trade Centre has estimated that the UK has an untapped potential of £124 billion in the export of goods alone. As my hon. Friend has so rightly said, this means that we need to help businesses to export more, whatever their size—from the largest multinational to the small and medium-sized enterprises that are the backbone of our economy. It also means protecting businesses from injury caused by unfair trading practices such as the dumping of goods, and setting tariffs at a rate that balances their exposure to foreign competition with a need to access affordable supplies. I again congratulate my hon. Friend on championing the ceramics industry so effectively ahead of the announcement of what no-deal tariffs would look like.

We also need to improve our export support. Last August, we launched our export strategy. This set a national goal of raising exports from 30% of GDP to 35%, moving us towards the top of the G7 and thus realising our aim of being a trading superpower. This builds on the UK’s industrial strategy, with the ambition of making exporting the norm, not the exception, for our businesses, working with firms of every size to unlock their exporting potential.

The export strategy sets out a step change in the Government’s support offer based on four main types of barrier that are stopping businesses reach their exporting potential: first, a lack of access to financing; secondly, a lack of connections or an “in” into local markets; thirdly, a lack of information or knowledge about exporting, or the ability to easily acquire it; and fourthly, the need to encourage firms to begin their exporting journey. I will make a few remarks about each of these.

First, financing of trade, I am pleased to say, is an area where we have been a pioneer. The UK’s award-winning credit export credit agency, UK Export Finance, was the world’s first export credit agency, and it has been found, in each of the past two years, to be the best export credit agency in the world. It provides businesses of all sizes with export finance so that they can win contracts in the first place, trade finance to give them the cashflow to fulfil them, and insurance to make sure they get paid at the end. We know that 77% of the businesses it helped last year were SMEs. We have partnered with five of the UK’s biggest banks to make it easier for SMEs to access UKEF support. Since introducing its trade finance products in 2011, designed around the needs of smaller businesses, UKEF has helped to enable more than £4.1 billion-worth of UK exports. This Government have already increased UKEF’s capacity to over 100 markets and the number of currencies to more than 60. That means that companies that buy British goods in a foreign jurisdiction can buy using currency and borrow in a local currency, thanks to the sovereign guarantee provided by UKEF.

The 2018 Budget increased UKEF’s direct lending support by £2 billion over the financial years 2020-21 and 2021-22, as we leave the European Union. As my hon. Friend remarked, the spring statement, only last week, announced a new general export facility. This will enable exporters to access a UKEF-backed loan to support their cashflow for a much wider variety of uses—instead of just to fulfil a specific contract, to access the sovereign guarantee. This support will take the form of a guarantee on 80% of the value of a loan—or, as I understand it, an overdraft—from a bank, and will be available from UKEF’s partner banks and non-bank financial institutions. In addition, UKEF is holding a consultation on creating a more flexible content policy. At the moment, the content has to be at least 20% from the UK supply chain. We are looking to see whether we can make that more flexible so that we can support exports all over the world and, by doing so, show maximum flexibility and maximise the economic benefits to the UK.

Secondly, on connecting businesses into local markets, to do this we have a network of DIT staff in 108 countries across the world. They provide businesses, both large and small, with practical advice on local regulations, business practices or consumer preferences. They point those businesses towards specific opportunities, help them make local connections, and lobby directly on their behalf. Again, this is especially helpful for small businesses who are entering these markets for the first time. I am pleased to say that they are reinforced by Her Majesty’s newly appointed nine trade commissioners—senior leaders with strategic expertise who have been given the authority, autonomy and resources to drive our trade performance in key priority markets around the world, as well as being supported by more than 240 DIT ministerial visits.

Thirdly, we have taken steps to help better inform businesses about the opportunities to export. This includes a network of sector-specific and region-specific advisers. My hon. Friend referenced this, and put in a bid for a ceramics specialist based in his area. As well as having specific advisers—we will consider his bid today carefully—there are 17,000 specific opportunities listed on our great.gov.uk website from markets around the world for UK businesses to express an interest in and apply for.

Finally, we have also taken measures to encourage businesses to export. Our research told us that small businesses that are new to exporting often overestimate the difficulties. In fact, many businesses told us that once they had started exporting, they wished they had done it sooner. As I said, we estimate that there are hundreds of thousands of small businesses that could be exporting but do not. A key part of tackling that issue is not the Government urging and persuading particularly, but getting successful exporters to share their experience with others. That is why we are rolling out our successful northern powerhouse export champions scheme to the entire country, which we committed to in the export strategy. There will be a network of 1,000 exporters who can act as advisers and critical friends to SMEs that are beginning to export. Only yesterday we launched the scheme in London, and tomorrow we will launch it for the east of England region.

Those four areas are the heart of our export strategy. It is a strategy that has been designed from the ground up, with implementation in mind. That is why we developed it with business, from roundtables and meetings to workshops and user surveys, and why we have focused Government support on what Government do best, rather than duplicating our excellent private sector market in export support and financing. It is also why we agree that this support must be properly resourced. It is why we have the UK’s first ever Department of State solely dedicated to international trade. If we are to compete, particularly as we leave the European Union, we need to ensure that we are able to support and project the UK offer all around the world, as other countries and rival suppliers seek to do so.

A variety of points have been made in the debate, including on the need to ensure that certification of food exports is facilitated. We take that extremely seriously and are doing everything we can to plan ahead for it, particularly if we end up leaving without a deal. My hon. Friend suggested an MPs’ guide to export services. I pledge to take that away and look at it. It sounds like an extremely good idea and something that we should follow up. We heard praise from his neighbour, Gareth Snell, for the Staffordshire chambers of commerce. I would like to praise not only that chambers of commerce but the others around the country, which provide that close link and encourage people on the exporting journey.

My hon. Friend made a point about Stoke’s reliance on smaller businesses. We have to get our strategies right to help smaller businesses. Often we can do that by improving our digital offer. It is much improved, but we have further to go in making it better still. Focusing on exports and trade and opening up markets around the world—my Department’s brief—is fundamental to delivering the prosperity that our constituents want for their lives. It is also fundamental to generating the tax receipts that will pay for the public services on which they rely.

This Government have joined up the drive and focus on economics, linking it through to the wider social policies that we all want to see delivered. One of the great failings of the Labour party was that it neglected that. That is why we have painstakingly built a business-friendly environment, and by doing so, we have got record numbers of people in work. We have been able to put record amounts of funding into the NHS and see breakthroughs—for instance, in breast cancer this week. It is all thanks to joining up, all the way through from the smallest business in my hon. Friend’s constituency going on the exporting journey, to the tax receipts that then pay for the public services on which we all depend.

Question put and agreed to.

House adjourned.