SMEs: Small and Medium…Exporters

Joe Wright, 9 October 2013

HSBC might have started something yesterday. It began with their announcement of a new pot of £5 billion to lend to Small and Medium-size Enterprises (SMEs), specifically wanting to expand into overseas markets. In a press release, HSBC claimed they wanted to be ‘the leading bank for international trade’, which they see as ‘being key to future UK growth’.

At the same time, they also picked a fight with the government by releasing an 8-point manifesto, calling for much stronger measures to increase exports. Alan Keir, Chief Executive of HSBC, claimed “Britain’s businesses are among the most innovative and imaginative in the world. But, in recent years these talents have failed to deliver significant export growth.” The manifesto called for an overhaul of the process for business visas to help foreign firms come to the UK and do business (it can take up to 15 days for business people from emerging markets like Bangladesh or Indonesia), setting up export tax credits for SMEs, improving access to language training, and creating a network of ‘welcome centres’ for key sectors in other countries.

HSBC believe the government needs to push SMEs to enter emerging markets in countries like India and Brazil, otherwise the UK will lose out to competitors. The ONS is already showing signs of a shift away from our more familiar trading partners: whereas exports to the EU have remained roughly unchanged for some time, UK trade in goods to countries outside it have increased in the last quarter by £1.3 billion to £14.2 billion. In turn, the UK deficit on trade in goods and services has fallen by £1.1 billion from May to June. It is, however, slow progress when compared to the overall trade deficit and the government’s target of doubling UK’s exports by 2020.

Unfortunately, the political energy HSBC is seeking to make the UK a bigger exporter is being diverted to the debate over the government’s own finances. The Conservatives, at this year’s conference, have begun talking about a surplus for the next parliament, but not the one that can really matter. The other parties are all setting different agendas, such as Labour’s ‘cost of living crisis’. Perhaps it is because they feel trade balances are too wieldy a concept to communicate to voters. But important as the government deficit is, the future of the UK economy is in the state of its trade – as HSBC is trying to point out.