CBI, Finastra research shows SMEs face barriers to international trade

The CBI and Finastra collaborated with YouGov to survey over 200 financial decision makers at UK-based small and medium-sized enterprises (SMEs) to better understand current business perceptions toward international trade and accessing finance. The goal was to gain more insight into the challenges businesses are facing, their attitudes toward finance, and their aspirations for international growth. The research is part of the CBI's International Trading Toolkit, which aims to support UK SMEs across all industries in achieving their expanded global trade goals.

It reveals that while only 44% of businesses polled now engage in foreign trade, only 23% claimed they were not interested in doing so. Because of perceived impediments and a lack of support, one-third of respondents do not trade globally despite recognising potential value.

The impact of Brexit (23%), being too small to trade globally (16%), and having little knowledge of foreign markets (15%) are common impediments mentioned by respondents.

Key takeaways from the survey include

Ambitions for growth: enterprises that actively trade internationally see potential for additional expansion; 27% of them anticipate raising imports or exports, compared to just 4% of non-trading businesses.

Sources of finance: financial institutions that businesses have an existing relationship with are the most common provider of finance (51%), although many businesses use their credit card (43%) and overdraft (28%) which are traditionally more expensive. Nearly two out of every five firms have never applied for funding, indicating that more needs to be done to educate them about how finance may support their growth goals and help them choose the right solution.

Potential for embedded finance: With three in ten respondents expressing interest in using embedded finance solutions, helping businesses understand the value embedded finance can deliver will be key to future growth. For example, ecosystems created by tech and fintech companies can support the matching of supply and demand of loans, using third-party data to provide personalised loan offers for SMEs.

SMEs in the international market

Despite what SMEs currently contribute to economies and society, they are frequently underrepresented in global trade. They contribute very little to exports, especially when compared to their overall activity and employment share. This is partially due to the fact that SMEs have fewer resources to cover the high costs frequently involved with doing business in foreign markets. Additionally, smaller businesses have a difficult time navigating overseas markets than larger ones because they lack the resources to handle complex regulatory requirements.

While SMEs encounter many of the same trade obstacles as larger businesses, their effects are frequently disproportionate. This means that both SMEs and larger businesses will profit when policymakers take action to lower trade costs, improve trade facilitation and connectivity, and reduce barriers to trade in products and services. Additionally, the development of global value chains (GVCs) and the digital revolution present SMEs with fresh chances to integrate into the world economy.