With Brexit looming, it would make sense for Britain’s small business community to be revisiting contingency plans for trading abroad, but it seems that instead, firms are losing their appetite for overseas trade altogether, research from Money Transfer firm World First has revealed.
World First’s Global Trade Barometer suggests that the number of British firms doing business abroad hit a new low in Q4 2017, dropping to just 26% of all SME’s. One year previously, more than half (52%) of businesses surveyed were engaged in international trade, which means that some 1.5 million businesses have suspended their overseas operations in the last year.
Despite the government’s best efforts, with the Department of International Trade pushing the benefits of trading overseas at every opportunity to avert a post-Brexit slowdown, the number of firms who plan to export during the next quarter has also dropped, from 31% in Q1 2017, to just 29% by Q4.
Despite the disappointing news, World First’s research did reveal that firms are becoming more comfortable with the fast approaching divorce from the EU. The most recent data from Q4 suggests that 41% of SMEs feel positive about Brexit, up from 33% year on year.
Those firms that are prepared to do business overseas, however, have met with above average levels of success. The Barometer revealed that average trading amounts rose to £45,536 in Q4, up more than £500 on average from the previous quarter. Those traders who are exporting tend also be be doing it across a greater number of regions, including Western Europe, Asia and North America.
Domestically, times have been tough, too. 43% of SME’s predicted growth of 5% or more during Q4 2017, but only 38% shared the same level of optimism going into Q1 2018.
World First suggested that overseas traders remain keen to take advantage of spikes in the Pound to Euro or Dollar exchange rate by locking in forward contracts, protecting themselves against future depreciation in the process. Inflation and interest rates are playing a key role in determining how the pound will perform, with the Bank of England rumoured to be planning to hike rates at least twice in the next year, and to try to bring levels of inflation under 2%.
London is where the highest percentage of businesses are making overseas transactions, with 45% of SMEs completing money transfers in Q3 2017, followed by the South East of England, 30%, West Midlands, 30%, and North West, 27%.
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