The British Chambers of Commerce quarterly Trade Confidence Outlook for Q3 revealed a worrying decline in export growth following five consecutive quarters of flat activity.
It showed a sizeable proportion of SME exporters are facing an increasing squeeze on their operating margins as 65 per cent expect their prices to go up, but 39 per cent expect their profitability to go down.
SME manufacturers trading overseas are under particular pressure with only 32 per cent expecting their profitability to increase in the next 12 months and 42 per cent expecting a decrease. Although SME service exporters were slightly more optimistic than manufacturers, 37 per cent expect a decrease in profitability, while 35 per cent expect an increase.
SME manufacturing exporters are also the most likely (73 per cent) to expect to raise prices in the next year, close to record highs.
Almost nine out of 10 (89 per cent) firms in this sector cited “raw materials” as their biggest cost pressure, with 80% citing “utilities” and 75 per cent citing labour costs.
Head of trade policy at the British Chambers of Commerce, William Bain, said with the trade deficit still standing at over £20 billion, the government must increase business confidence and capacity to sell overseas.
“There are major opportunities for SME exporters to be made in exploiting Free Trade Agreements, but too many firms are currently unaware of these or unsure of how to take advantage,” he said.
“The UK Government needs to focus on really pushing awareness of these deals, especially among smaller businesses. It must also bring firms further into the fold on negotiations, so they have more involvement from the off, and take decisive action on reducing some of the removable EU red tape costs for traders.
“Small and medium sized businesses are the ones who have been really facing the pain of the current difficult international trading conditions.
“They are much more exposed to the combination of supply chain disruption, soaring prices, and the impact of Brexit red tape and compliance costs, than larger companies.
“This research uncovers the trends that are often masked in the ONS figures by the high value and trade volumes of larger corporates. Our data shows there are serious underlying issues — which are hitting smaller manufacturing exporters the hardest.
“But our Chamber Network stands ready to help. We are experts in international trade and have affiliates in 78 markets around the world to help make the strategic connections needed to effectively exploit new markets. We urge the UK Government to use our Chamber Network for their local reach and global network to get Britain selling again.”
