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SMEs shun international trade and turn attention to domestic markets

Nearly two-thirds of SMEs (65 per cent) are concerned about the state of the global economy, and only seven per cent believe international trade is the greatest growth opportunity available to them, according to a new study.
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Small and growing businesses are increasingly turning to domestic growth and rejecting international growth amid global uncertainty.

Nearly two-thirds of SMEs (65 per cent) are concerned about the state of the global economy, and only seven per cent believe international trade is the greatest growth opportunity available to them, according to a new study.

International business funder Bibby Financial Services (BFS) surveyed decision makers in SMEs in the UK, US, Canada and eight other countries around the world to produce the figures.

SMEs indicated the main perceived threats to global economic growth include the political situation in the UK (29 per cent), Brexit (20 per cent) and conflict, war or terrorism (15 per cent).

When it comes to domestic markets, however, SMEs are significantly more positive in outlook. Around 53 per cent describe the performance of the local economy over the past 12 months as good, while 33 per cent expect the local economy to improve over the next year.

The greatest perceived opportunities for growth included finding new market segments (12 per cent), expanding domestically (12 per cent) and developing new products and services (11 per cent).

David Postings, global CEO of BFS, said: “There are a number of universal barriers to international trade that SMEs must overcome, including time-zones, cultural nuances, border regulations, legal practices and languages. However, our research reveals that currency volatility is the number one concern amongst SME owners today.

“Large and small businesses across the world have been impacted by foreign exchange fluctuation over the past year, and this is causing many SMEs to shy-away from international trade, to avoid such risk.
 
“However, there are significant opportunities available for businesses that are able to mitigate risk associated with currency volatility, by locking-in rates to protect against further fluctuations.”
Although SME leaders have reservations about the global economy, many are optimistic about their own growth prospects. Some 49 per cent said they had grown in the last 12 months, and 55 per cent expect to grow in the coming 12 months.

According to a report by Cebr for World First, the value of UK exports is stagnating and the UK is set to miss the target set by the government in 2012 of reaching £1trn worth of exports by 2020. Around 42 per cent of UK SMEs believe that Brexit will have a negative effect on exporting.

This article is part of a wider campaign called the Scale-up Hub, a section of Real Business that provides essential advice and inspiration on taking your business to the next level. It’s produced in association with webexpenses and webonboarding, a fast-growing global organisation that provides cloud-based software services that automate expenses management and streamline the employee onboarding process.

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About Author

Letitia Booty

Letitia Booty is a special projects journalist for Real Business. She has a BA in english literature from the University of East Anglia, and since graduating she has written for a variety of trade titles. Most recently, she was a reporter at SME magazine.

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