UK small businesses struggling to take advantage of trade deals – Financial Times

UK Small and Medium-Sized Enterprise Export Performance and Alignment with Sustainable Development Goals

Executive Summary

A recent survey indicates that small and medium-sized enterprises (SMEs) in the United Kingdom are experiencing significant challenges in capitalizing on new trade agreements, with a majority reporting stagnant or declining export performance. This trend poses a direct threat to the achievement of several Sustainable Development Goals (SDGs), most notably SDG 8 (Decent Work and Economic Growth), SDG 9 (Industry, Innovation, and Infrastructure), and SDG 10 (Reduced Inequalities). The data reveals a disconnect between the implementation of international trade policy and the capacity of smaller businesses to benefit, highlighting a need for enhanced support systems aligned with sustainable development principles.

Analysis of Current Export Climate for UK SMEs

Survey Findings on Export Performance

A survey conducted by the British Chambers of Commerce (BCC) Insights Unit, encompassing 4,600 predominantly small companies, revealed a concerning outlook on export activity in the third quarter:

• Micro-Enterprises: 84% of businesses with fewer than 10 employees reported flat or falling export orders.
• Overall Exporter Sentiment: Less than 25% of all exporting businesses surveyed reported an increase in export sales or orders, indicating weak overall sentiment.
• Contrast with Larger Businesses: Larger firms with 250 or more employees showed greater resilience, with 42% reporting a rise in export orders.

Implications for Sustainable Development Goal 8: Decent Work and Economic Growth

The poor export performance of SMEs directly undermines progress towards SDG 8. As SMEs are crucial for job creation and economic dynamism, their inability to expand internationally constrains national productivity and sustainable growth. BCC analysis suggests a 2% increase in UK exports could elevate long-run GDP growth by 0.6%, underscoring the high stakes of resolving these export barriers for the nation’s economic health.

Identified Barriers to SME Export Growth and SDG Attainment

Structural and Policy Challenges

The primary obstacles preventing SMEs from thriving in international markets are multifaceted and hinder inclusive growth:

1. Post-Brexit Bureaucracy: SMEs report significant difficulties navigating the complex administrative and regulatory requirements for trade with the European Union.
2. Adverse International Trade Policies: Punitive tariffs and the termination of a tariff exemption for consignments under $800 by the United States have created financial and logistical hurdles.
3. Inadequate Access to Support: A lack of accessible and affordable trade finance disproportionately impacts smaller firms, limiting their ability to compete globally.

Impact on SDG 10: Reduced Inequalities

The challenges identified disproportionately affect SMEs compared to larger corporations, which possess greater resources to manage complex bureaucracy and absorb tariff-related costs. This dynamic exacerbates economic inequalities between small and large enterprises, running counter to the objectives of SDG 10.

Government Strategy and Institutional Support

Official Measures and Contradictory Actions

The Department for Business and Trade (DBT) has stated its commitment to boosting exports through new trade deals and has increased the lending capacity of UK Export Finance to £80bn. However, these initiatives are contrasted by other developments:

• Resource Reduction: The DBT is reportedly implementing 20% efficiency savings, which includes cuts to export promotion teams and a paring back of the regional adviser network that provides crucial support to SMEs.
• Stagnated Trade Contribution: A recent World Trade Organization assessment noted that the UK’s trade contribution to GDP growth has stagnated since the pandemic, with a significant drop in the number of SMEs exporting to the EU post-Brexit.

Recommendations for Aligning Trade Policy with SDGs

Enhancing Partnerships for the Goals (SDG 17)

To ensure trade agreements translate into tangible benefits for all sectors of the economy, stronger partnerships are required. The government must enhance its support mechanisms to help SMEs navigate and leverage these deals, transforming policy into practice and fostering a more inclusive trading environment.

Investing in Innovation and Infrastructure (SDG 9)

Calls from the International Chamber of Commerce to accelerate the digitization of trade are directly aligned with SDG 9. Modernizing trade infrastructure would reduce antiquated bureaucratic barriers, a key structural impediment for SMEs. Investment in digital systems and accessible trade finance is essential to build resilient infrastructure, promote inclusive industrialization, and foster innovation for smaller enterprises.

1. SDGs Addressed in the Article

• SDG 8: Decent Work and Economic Growth: The article’s central theme is the struggle of small businesses in international trade, which directly impacts economic growth, productivity, and job stability. It discusses how a 2% increase in exports could boost UK GDP and how trade stagnation affects the economy.
• SDG 9: Industry, Innovation and Infrastructure: The article touches upon the need for modernizing trade systems and infrastructure. The call to “digitise trade” to overcome “antiquated trade bureaucracy” and the focus on increasing small and medium-sized enterprises’ (SMEs) access to financial services and markets relate directly to fostering a resilient and innovative industrial sector.
• SDG 17: Partnerships for the Goals: This goal is relevant as the article discusses international trade policies, trade deals (with the US, EU, India), and the barriers (tariffs, red tape) that affect global partnerships. It highlights the importance of a functional, rules-based trading system, referencing the World Trade Organization (WTO).

2. Specific SDG Targets Identified

SDG 8: Decent Work and Economic Growth

1. Target 8.3: “Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services.” The article directly addresses this by focusing on the challenges faced by SMEs, calling for more government support, and mentioning the role of UK Export Finance in providing financial support to these businesses.

SDG 9: Industry, Innovation and Infrastructure

1. Target 9.3: “Increase the access of small-scale industrial and other enterprises… to financial services, including affordable credit, and their integration into value chains and markets.” The article highlights that SMEs face “structural barriers,” including access to “cheaper trade finance” and difficulties integrating into EU and US markets due to bureaucracy and tariffs. The government’s increase in lending capacity for UK Export Finance is a direct policy action related to this target.

SDG 17: Partnerships for the Goals

1. Target 17.10: “Promote a universal, rules-based, open, non-discriminatory and equitable multilateral trading system under the World Trade Organization…” The article discusses barriers that undermine an open trading system, such as “post-Brexit bureaucracy” and “Trump’s tariffs,” which run counter to the principles of this target.
2. Target 17.11: “Significantly increase the exports of developing countries…” While the UK is a developed country, the principle of increasing exports is central to the article. The government’s stated goal to “boost UK exports” and the concern over “flat or declining exports” from SMEs align with the spirit of this target.

3. Indicators for Measuring Progress

• Percentage of small businesses with changing export orders: The article explicitly states that “84 per cent businesses with fewer than 10 employees reported flat or falling export orders” and “less than 25 per cent [of all exporters] reporting rising export sales or orders.” These figures serve as direct indicators of SME performance in international markets.
• Number of firms ceasing to export: The article cites a study finding that “16,400 small firms ceasing EU exports altogether” after Brexit. This is a clear, quantifiable indicator of the negative impact of trade barriers on SMEs.
• Percentage change in export value: The article mentions a study that found “exports to the EU from UK-based SMEs fell 30 per cent after Brexit,” providing a specific metric to track trade performance.
• Trade contribution to GDP growth: The WTO’s assessment that the “UK trade contribution to GDP growth had ‘stagnated’ since the pandemic” is an implied high-level indicator of the overall economic impact of trade performance.
• Value of financial support for exporters: The article notes that the government “increased the lending capacity of UK Export Finance… by £20bn to £80bn.” This financial figure is an indicator of the level of government support available to SMEs to facilitate trade.

4. Summary Table of SDGs, Targets, and Indicators

Source: ft.com