The Support SMEs Need For International Success
Neh Thaker, co-founder of HedgeFlows
As the UK continues to battle against the challenges that 2023 presents with a toxic mix of rising interest rates, rampant inflation, and a lack of adequate support from banks, small and medium-sized enterprises are faced with increased challenges that are impacting their ability to thrive and expand.
These challenges not only hinder their domestic operations, meaning businesses are allocating budgets with caution and rethinking their current working models, but also deters them from trading internationally.
Government research highlights the importance of strong international relations and the ability to trade worldwide, showing that the UK’s exports of goods and services totalled £815 billion in 2022, boosting both business and economic growth.
Shifts in global trade flows and international relations, triggered by geopolitical tensions and the war in Ukraine, means worldwide trading is being reshaped and there is now a pressing need for increased support to be provided to SMEs as they struggle to gain an international presence.
Banks Neglecting SMEs: A Troubling Reality
An SME Empowerment Report, which involved 500 UK SME owners polled by HedgeFlows, paints a disheartening picture. A striking 70 per cent of SMEs believe that banks actively favour larger companies, a perception that is sustained by the lack of support they have experienced across various facets of banking services. This disparity in treatment highlights the pressing need for banks to address the concerns and provide equitable support to all businesses, regardless of their size.
Alarmingly, 72 per cent of SME owners expressed dissatisfaction with the limited support provided by their banks in managing international payments, acting as a significant barrier to trading overseas and regaining confidence.
Additionally, a staggering 73 per cent of SMEs struggle to secure meetings with their banks or financial managers, resulting in frustrating delays in implementing their business plans.
High Trading Costs: An Impediment for SMEs
The burden of high trading costs is particularly painful for SMEs trading internationally as it directly affects their chances of success when it comes to their ambitions overseas. The survey reveals that 72 per cent of SMEs find bank transfer fees for international transactions prohibitively expensive.
The high trading costs make it increasingly difficult for smaller sized companies to engage in international trade and expand their operations beyond national borders, hindering their potential for growth and expansion.
By reducing these financial barriers and creating a more affordable trading environment, SMEs can seize new market opportunities, diversify their customer base, and drive economic prosperity.
The Importance of SMEs: Fuelling the UK Economy
SMEs act as the lifeblood of the UK economy, making up 99 per cent of the business population. They are critical contributors to innovation, particularly in the dynamic FinTech sector, where they play a pivotal role in driving technological advancements, disrupting global markets, and facilitating international trade.
Recognising the significance of SMEs, the government has taken steps to implement a range of support measures aimed at nurturing their growth and development. Notably, the recent introduction of their SME action plan, which provides support to small and medium-sized businesses for the next three years, demonstrates the government’s commitment to empowering these enterprises. However, it is imperative to acknowledge that further efforts are necessary to effectively facilitate global trade for SMEs.
Overseas Expansion: An Imperative Opportunity
Expanding into international markets presents a tremendous opportunity for SMEs. It enables them to tap into new markets, diversify their revenue streams, and foster innovation by exposing themselves to new talent and ideas.
However, the survey highlights a critical gap in support provided to SMEs for international expansion. There must be an increased focus on driving practical solutions for businesses who wish to expand overseas, helping to reduce costs and provide protection against the uncertainty of global markets.
Addressing the Support Gap
To rectify the support gap faced by SMEs, banks should take proactive measures such as providing comprehensive assistance for international payments. Small and medium-sized businesses are often affected by sudden shifts in exchange rates meaning the cost of doing business globally can be high.
Ensuring that SMEs have access to the necessary tools and resources to navigate cross-border transactions effectively is vital and banks need to prioritise communication and accessibility, offering them the opportunity to engage with financial managers who understand their unique needs and can provide tailored guidance.
Government Support for SMEs
The government plays a pivotal role in supporting SMEs and fostering an environment that promotes growth. Over the years, the government has introduced various initiatives, grants, and funding schemes aimed at bolstering the success of SMEs.
However, it is essential to continuously evaluate and enhance these programs to meet the evolving needs of SMEs in an ever-changing global landscape.
Collaborative efforts between the government, banks, and FinTech platforms can create a robust support ecosystem for SMEs, nurturing their international aspirations and facilitating their overall growth.
Bridging the gap
SMEs are the backbone of the UK economy, driving growth, innovation, and job creation. However, their potential for international success is hindered by the lack of adequate support from banks, as well as the government.
It is imperative for banks and other providers to recognise the importance of SMEs and provide them with necessary and accessible tools, resources, and guidance to thrive in global markets. By empowering SMEs and facilitating their international expansion, we can unlock their full potential, ensuring a prosperous future for both businesses and the broader economy while promoting international relations.
It is time to bridge the support gap and create a level playing field that enables SMEs to succeed on the global stage.
Uma Rajagopal has been managing the posting of content for multiple platforms since 2021, including Global Banking & Finance Review, Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune. Her role ensures that content is published accurately and efficiently across these diverse publications.