All Abroad for the Big Foreign Sell ; the Overseas Sales Market and Fluctuating Exchange Rates Can Appear Daunting, but If a Product Can Make It at Home, It Can Make It Away
Trapp, Roger, The Independent (London, England)
Considering Britain's long tradition as a trading nation, it is perhaps surprising to find it close to the bottom of a recent league table of exporting countries. And when you consider how many quintessentially British items - cashmere pullovers, Scotch whisky, Cheddar cheese - crop up in shopping aisles around the world, this is even harder to believe.
Yet, according to figures released as part of the International Business Owners Survey by Grant Thornton, the accountants and advisers to growing businesses, only Japan, Russia, Australia and the United States had a smaller proportion of firms exporting than the UK's 36 per cent.
Within that figure, there is considerable regional variation. Businesses in Northern Ireland are the most likely to export, with 52 per cent planning to sell overseas in the coming year. In the Midlands, the east of England and the North, the figure was about 40 per cent, while in London, the South, the South-west and Wales, it was about 30 per cent. But in Scotland, only 15 per cent of businesses export.
The overall findings show a marked decline from two years ago, when 52 per cent of businesses reported overseas sales. This drop supports the argument of the Confederation of British Industry and others who had argued that the strong pound was putting Britain at a disadvantage in international trade.
But there is hope of an improvement. The theory that the recent weakening of sterling against the euro might lead to a rise in exports is aired by Graeme Forbes, Grant Thornton's head of entrepreneurial services, who says: "We may well see a return to form for British exports in the coming year." However, the pound has remained strong against the US dollar, putting British companies at a disadvantage when selling to the US, which, with France and Germany, is one of the most popular destinations for UK exports.
The lesson, perhaps, for growing businesses thinking of taking the plunge and expanding through overseas sales, is not to be overly influenced by the supposed advantages or disadvantages of exchange rates. These remain so volatile that what can be a benefit one year can be a serious disadvantage the next.
One chief executive who is convinced that companies need to just get on with it is Peter Thompson of Tyne & Wear-based construction products company Compriband. A joint venture with a German company, Compriband imports 95 per cent of its raw materials, largely from its joint venture partner.
Because of the recent strengthening of the euro against the pound, raw materials are becoming more expensive. But because of competition and the general state of the economy, he cannot do anything about the price he charges UK customers.
Though the pounds 2.5m turnover company exports less than 10 per cent of its products, much of those overseas sales go to countries where the currency is linked to the dollar, which is currently weak against sterling, meaning that the company receives less than it has done for such sales. "If you export to some countries in euros and to others in dollars, you can get a double whammy," Thompson adds.
One way that companies like Compriband cope is by trying to reduce their exposure to currency fluctuations by buying the currencies in which they are trading in advance. This can help smooth out variations if the exchange fluctuates, but if it just moves in one direction - as has happened recently - it does not help.
Even so, Thompson remains pragmatic. Pointing out that the effect of currency fluctuations will depend on how much of a company's costs raw materials account for, he says: "Exchange rates and interest rates are not there for one company's benefit. The role of the chief executive is to override all of that. You should know that you also have these external influences before you get into the game." Instead, companies must focus …
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Publication information: Article title: All Abroad for the Big Foreign Sell ; the Overseas Sales Market and Fluctuating Exchange Rates Can Appear Daunting, but If a Product Can Make It at Home, It Can Make It Away. Contributors: Trapp, Roger - Author. Newspaper title: The Independent (London, England). Publication date: July 5, 2003. Page number: 2,. © 2009 The Independent - London. Provided by ProQuest LLC. All Rights Reserved.