The unsung heroes boosting British business
If you watch The Apprentice, you may think that running a business is all about fast-talking and posing in designer clothes. In the real world, limousines and killer heels have little to do with creating a thriving enterprise. Commercial success stems, instead, from insight, courage and hard graft.
I’ve come across all these qualities and more in recent weeks, while getting to know four unsung heroes of British business. Rather than sitting in plate-glass buildings, they operate at the sharp end, plying their trade in prefabricated huts on drab industrial estates or even on their own kitchen tables.
For all four run companies with less than 250 employees – the formal definition of a small- to medium-sized enterprise, or SME. They also happen to be vital to Britain’s economic future. SMEs generate half the UK’s national income and two-thirds of all employment. Hotbeds of ingenuity, they also account for 54 per cent of our exports. So if Britain is to mount a genuine economic recovery and create the wealth and jobs needed to secure decent livelihoods for the bulk of our people in an ever more competitive world, our SMEs must succeed and grow in the mass markets of tomorrow, namely Asia.
Rico Gusman is a director of Sales Media Evolution. Launched in 2011 from a garden shed in Ipswich, this highly-ambitious company has developed its unique dBanner – a roll-up vertical screen, powered by mains or battery, which shows high-quality static or video images. “Exports are already 15 per cent of our turnover and could soon be much more,” Gusman says. “We’ve developed superb technology and throw in top-class design work too”.
The dBanner is already on sale in both Asia and Africa. “Despite early fears, we’ve found doing business in these places is easier than the UK,” he says. Gusman is confident of building market share in Asia, even with concerns customers there will mimic the dBanner. “They can’t replicate our art work, and they’ll struggle to beat our price”.
Andy White also started his business, CTruk, in 2010. He uses a “resin-infusion” process to build strong, light twin-hulled powerboats in Brightlingsea, Essex. “Initially, we focused on the offshore wind market,” he says. “Our vessels burn half the fuel of their aluminum competitors, making the construction and maintenance of offshore wind farms more economic.”
CTruk already has 150 staff and looks like turning over £38m next year. “Exports are 10 per cent of our business, but we want that to reach 50 per cent over the next three years by going into Asia”. His boats are increasingly in demand by cash-strapped navies in both Asia and the Middle East, as small, efficient vessels help cut costs.
“Offshore wind prompted us to develop our technology, but I think 90 per cent of our exports will eventually be defence-related,” White says. With that in mind, CTruk is receiving help from the government’s trade promotion body. “A key challenge in Asia will be finding good partners and we’re hoping the defence arm of UK Trade & Investment can assist with this search.”
Andrew Keeble and his family run another new SME called Heck Food, producing upmarket sausages. Based in North Yorkshire, Heck already has a £3m turnover and has managed to place its products with the all-powerful supermarkets. But “the biggest barrier to further development”, Keeble says, has been finance. “The banks aren’t lending and have been largely unhelpful, displaying a serious lack of business acumen.”
Despite this potential set-back, Heck also wants to spread its wings in Asia, exporting frozen products. “Given the region’s growing wealth, and changing consumption patterns towards meat and quality goods, China alone could quickly become 50 per cent of our business”.
Having examined the market carefully, Keeble is mindful of potential cash-flow issues. “The Chinese will pay 50 per cent for our first shipment but we’ll have to trust them for the rest – and that’s new territory for us”.
While also an SME, Melin Tregwynt is anything but a start-up. The company began in 1912, and produces premium woolen goods in Pembrokeshire. Exports are just 8 per cent of turnover, but the company has a lot of overseas experience, particularly in Japan. “The Japanese like distinctive products, with an artisanal story behind them,” says Eifion Griffiths, a company director and grandson of the founder.
“China is definitely our next step,” says Griffiths, who is visiting the country for the second time this autumn. “Rising Chinese incomes should drive demand for our authentic products, as in Japan.”
So why isn’t the government helping these companies export more? After all, the coalition pledged to “rebalance the economy” away from consumption and towards exports. “We’re competing in a global race”, said David Cameron back in October 2012. Yet for all the Prime Minister’s rhetoric, and a 25 per cent decline in the trade-weighted value of sterling since the credit crunch began, our trade position has badly deteriorated.
In 2012, Britain sold goods and services abroad worth £310bn. But £420bn of imports meant we ran an external deficit second in size only to America. Our service sector surpluses are out-weighted by a much bigger trade shortfall in tangible goods. That’s why we’ve had a combined trade deficit for 26 years in a row.
Despite our matchless trading heritage, then, Britain’s external sector has dragged on growth for a generation. Last year’s deficit, at 3.7 per cent of GDP, was the largest since 1989. The UK simply must export more, in particular to fast-growing Asian markets.
When trying to export to far-flung places, SMEs face obstacles going beyond the usual lack of capital. Cultural and linguistic barriers often combine with an inability to spend the money and time abroad needed to secure all-important business relationships. And this is another reason why government help is crucial.
“While the internet makes life easier than when we started exporting, people still like to meet you, especially in Asia,” says Eifion Griffiths of Melin Tregwynt. That sentiment is endorsed by Margaret Byrne, a British consultant based in Australia, who has just published a book – Business Success in the Asian Century – aimed at Western entrepreneurs.
When SMEs want to do deals in Asia, Byrne says, “top people” need to travel. “Send a mid-level person and your Asian counterpart will put up a mid-level person too, so no decisions will be made”. She also advises that UK SMEs include a female executive in their team when conducting meetings in Asia. “Women are often better at sensing non-verbal signals and reading between the lines, a big part of doing business in the region”.
Byrne warns that “face”, or reputation, is crucial. “While UK multinationals arrive with face, SMEs need to work harder as Asian businesses won’t be lining-up to trade with them”. So SMEs should make good use of trade bodies and local chambers of commerce “as that gives you more face”.
In Australia, Byrne reports, local governments have long been running “super-trade missions” to Asia. “Opportunities to meet and greet are laid-on and the trips are largely state-funded. Australian politicians fully understands that Asia is the future, and are acting on that, but the UK government needs to do much more.”
In May 2011, UKTI launched a five-year strategy to support British SME exporters. Since then, according to a new report from the Federation of Small Businesses, the share of SMEs exporting has remained fixed at just 21 per cent.
Only half of the SME exporters that the FSB surveyed this year – around 10 per cent of the total – had heard of UKTI. And just one in five – or 4 per cent of all SMEs surveyed – had used its services.
Meanwhile the proportion of non-exporting SMEs with plans to start selling abroad has fallen from 12 per cent in 2010 to 6 per cent in 2013, with the FSB reporting that access to finance has lately become “more of a problem”.
Asia’s resurgence is no fad. China has grown 10 per cent a year since the mid-1980s. Other Asian tigers, like South Korea, Taiwan and Malaysia, have expanded by 6 per cent a year or more. This year the combined GDP of the emerging markets will surpass the “advanced nations” for the first time in five centuries. Yet the BRIC economies (Brazil, Russia, India and China) together accounted for just 5 per cent of UK exports in 2012, less than Belgium. We’re barely engaging with these crucial markets – and Asia, with its 3.5bn population and counting, is the ripest market of all.
As wealth and sophistication spreads, Asia’s aspirational middle classes are demanding everything from machine tools to luxury goods. The UK is missing out. German exports are 41pc of its GDP and rising. Our export ratio is 20 per cent and falling. And while 30 per cent of Germany’s goods exports go to emerging economies, just 19 per cent of our far smaller export total is directed at these crucial markets of tomorrow.
The UK’s exporting multi-nationals can look after themselves. But if we’re to secure a sustainable recovery, our innovative and job-generating SMEs must be encouraged and helped to export much more, not least to Asia.
Britain’s political and media classes often view business as a marginal, unsavory pursuit. The craven money-worship and naïve banter of The Apprentice doesn’t help. But we all need to get behind a meaningful campaign to boost our exports, focused on SMEs and focused on Asia. For that’s the route to our future prosperity.