UK SMEs overwhelmingly see Germany as the most important country to the economy, according to the latest SME Confidence Tracker from business funder, Bibby Financial Services.
As the government sets its sights on new trading relationships outside of the European single market, SMEs have voiced concerns about looking beyond traditional trading partners such as Germany and the U.S.
Well over half of UK SMEs (59%) said that Germany is the most important country inside the EU to have trade ties with. One in ten (9%) believe that the French economy should be a priority for Prime Minister Theresa May and less still think that economics in Ireland, Spain, The Netherlands, Italy, Poland and Belgium (1%) are key to the UK’s economic prosperity.
When asked which countries outside of the EU they see as most important, over half (51%) indicated the U.S. and a third (32%) stated China – the two largest economies in the world.
Steve Box, International CEO at Bibby Financial Services, said: “Now it is almost certain that the UK will be leaving the single market, the future of the UK’s trading relationship with countries within the EU is more uncertain than ever.
“It is no surprise that the government is looking to build new trading relationships outside of the EU and beyond traditional partnerships. However, as many SMEs have little experience exporting outside of the EU, they are drawn to doing business in markets where there is already high demand for goods branded ‘Made in Britain’.”
Discussions to establish post-Brexit trade deals already under way and the aspirations of the UK government to build trade links with countries such as Australia, Canada and New Zealand are evident. Yet it is clear that the SME community have reservations over the importance and priority of securing trade with such countries.
Box added: “It is clear that Germany remains a key market for UK businesses both in relation to imports and exports.
“The UK has long standing and strong historical ties with the U.S. while China has long been seen as the driver of future growth for the global economy. China’s value as a trading partner to the UK is likely to grow even further following the new weekly freight train transporting goods between the two countries. The service, which launched this month, provides significant trading opportunities for both countries.
“Outside of traditional partnerships, however, many SMEs will be reluctant to spread their wings to new markets until there is clarity over the progress of such trade agreements and the potential opportunities for their businesses. Until such time, SMEs will continue to focus their efforts on markets they are familiar with. For this reason, it is key that the government is able to set out its stall and detail a plan sooner rather than later.”
Other findings from BFS’s SME Confidence Tracker show falling investment levels and increasing concern over rising costs among UK SMEs.
Over the next three months, just over one in ten (13%) businesses plan to invest in exporting. Over a quarter (28%) said that they were holding off on business investment due to concerns about the UK economy, with over a fifth (22%) not investing due to concerns about the wider EU economy.
Box concluded: “SMEs that export are more likely to grow and thrive. It is important that we offer support and encouragement to such businesses to enable them to take advantage of overseas opportunities while there is still much uncertainty in the economy.”