Small and Medium-Sized Enterprises

Lord Storey Excerpts

Wednesday 26th June 2013 Lords Chamber

[Lord Storey]

My Lords, first, I convey the apologies of my colleague, the noble Baroness, Lady Kramer, who served on the committee and was intending to speak this evening, but she has been invited by Barclays Bank, no less, to have dinner with some senior directors. She thought that it would be a good opportunity perhaps to influence or change their views.

After the Second World War, the then Government urged businesses to either export or die. I suggest that this motto is as important today as it was 60 years ago. Indeed, the accelerating effects of globalisation, combined with increasing competition from the world’s emerging economies, have, if anything, increased this maxim’s resonance.

Here in the UK, we do not have as large a percentage of businesses exporting as do our neighbouring competitors such as Germany, France or Italy. If we could increase the number of exporting firms to the EU average, we would go a long way to reducing Britain’s trade deficit, a shortfall that we have shouldered almost every year since the end of the Second World War. Why is it that the French, the Italians and the Germans are able to export more than us?

It is imperative we ensure that we are doing all we can to encourage an export-led recovery. We therefore established this Select Committee on Small and Medium Sized Enterprises to see which steps could be taken. It was my first Select Committee and it was a privilege to sit on it. I pay tribute to the chairmanship of the noble Lord, Lord Cope, and the committee staff’s professionalism. It should also be mentioned that it was the suggestion of the noble Lord, Lord Popat, that this topic be looked at in depth.

After months of collecting oral and written evidence and visiting exporter “success stories”, our Roads to Success: SME Exports report was published this spring. If its recommendations are taken seriously, and if government agencies take action to ensure that SMEs know where to go for help, I suggest that we will see major improvements.

The committee rightly concentrated on the wider benefits of increasing SME exports, but of course exports are also invaluable to each individual company. It is crucial we get more firms exporting; it is essential that we encourage those that already do so to look to new and higher-growth markets.

I was taken with some work carried out by the University of Glasgow which looked at the benefits to their own business of those individual companies that exported. The most striking statistic they found is that businesses setting out on their export journey achieve on average a 34% boost to their company’s productivity; that is, a rise of over a third in their first export year. The university’s research also found that these exporting businesses were 12% more resilient to weather tough economic times and, finally, that such firms are also better at innovation.

When you export to a range of countries, you need to be aware of the different tastes, needs, fashions, cultures and, indeed, foibles of each market. The lessons learnt are so powerful that almost every firm that begins to export also witnesses an increase in its domestic sales. The result of these learning processes is that firms, having been exposed to the competitive world of international trade, spread best practice here in the UK.

Countries have four engines of growth: government spending, consumer spending, investment and trade. Government and consumer spending is not likely to rise significantly, so the importance of getting more firms both to export and to invest in their technologies, plants and equipment is the only way in which the UK can pursue the growth we so desperately need.

The Select Committee found that there is plenty of help out there for firms. UK Trade and Investment, as we have heard, is worthy of considerable note. As we also know, many businesses are members of trade associations, chambers of commerce and support organisations such as the Institute of Directors, the Confederation of British Industry and the Federation of Small Businesses, to name a few. All these organisations must pledge—and have pledged, I hope—to increase exporting. I very much hope to see UKTI and UK Export Finance blowing their trumpets even louder to promote the services that they can offer.

The UK currently exports half its goods and services to the other 26—soon to be 27—European Union states. This is good news, although it is largely to be expected in our quota-tariff and free-trade economic area. However, that 50% goes to a group of nations that together represent only 7% of the world's population and only 18% of the world's GDP. Furthermore, this group of nations is potentially shrinking, not growing. We need to seek out new markets wherever they are. We have to take advantage of wherever growth is emanating from. I was pleased to learn that, for the first time, UK exports to China averaged more than £1 billion a month between February and April. We must remain optimistic about our SME exporters, and those who can must help SMEs on their journey to further growth. The Roads to Success report will undoubtedly assist us in this important enterprise.