This article is provided by BRC Associate Member, Shopify.
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Small and medium-sized businesses (SMBs) are just one of the groups that could suffer. But that’s not necessarily the best strategy for long-term growth. They make up 99% of our business population, and employ over 16 million people. They are the engine of our economy and, without them, there is no growth.
Come 26th November, they need more support, not less, if Britain’s finances are to get out of the doldrums.
Trading out of stagnation
According to Shopify’s own data, 72% of UK businesses are currently engaged in international sales, distributing their products and/or services to an average of 4.5 different countries. As such, increasing the opportunities for SMBs to trade internationally is one area where even low level support could have a multiplier effect on the UK’s economy.
Research by the Social Market Foundation found that, if the number of SMBs that export could increase by 70,000, there would be a £9.3 billion boost to national income and 152,000 more jobs.
But the current trading model isn’t built to sustain opportunities for SMBs. Research has found that a fifth (20%) say they’re held back by the red tape and paperwork that exporting creates, and a similar number (19%) cited regulatory barriers as negative influences to their opportunities. They need support and policies which enable trade to become an open door, rather than a locked gate.
Back ambition with practical support
Initiatives like the Backing Your Business plan signal positive intent from policymakers, and should be applauded.
But many SMBs have small and stretched teams who simply don’t have the resources to deal with the admin. Whether they’re trying to understand VAT rules in different markets or navigating the maze of international shipping, every friction point creates another barrier that could turn a sole trader into an international success story.
According to Shopify’s research, over half (56%) of UK businesses said that managing shipping and delivery across borders is one of the toughest hurdles they face. A quarter (29%) also said the complicated customs procedures is a top five barrier to international trade. The solutions to this are already there in the technologies available, the Government just needs to make it more accessible.
Digitising some of the admin tasks, such as introducing e-signature forms before shipping, could revolutionise trade overnight - especially if the Budget helps create a trade portal specifically for SMBs.
There also needs to be representation for SMBs during trade negotiations, for example, by forming a dedicated SMB Trade Council to act as their voice, and helping to foster bilateral export corridors specifically for these businesses. Doing so would give them targeted and simplified access to some of the most important markets.
Modern partnerships like the Canada-UK Trade Continuity Agreement (TCA) are helping to tap into these key markets - where 48% of the businesses polled by Shopify have a customer base. But the US is the biggest market, where 72% have customers, and it’s still a difficult market to break into. The Economic Prosperity Deal helped some industries, but it’s not a comprehensive agreement that sets SMBs up for success.
SMBs also need to be protected from unexpected shocks to their market, particularly challenging in the current geopolitical climate. That’s why it’s critical that the Government continues its commitment to the UK’s de minimis threshold of £135. De minimis makes cross-border selling accessible for small businesses. Without it, merchants and their customers face higher costs through taxation and complex customs processes.
A Budget that looks beyond the short term
As the Chancellor finalises the Budget, there will be pressure to focus on immediate fiscal concerns: balancing the books, managing inflation, and carefully addressing tax rises. They’re all incredibly important and necessary, but the only way to overcome them long-term is by kickstarting growth.
There needs to be policies that remove domestic and international barriers, encourage innovation, and reward global ambition. SMBs have already shown what’s possible when they reach international customers.
For example, sustainable beauty brand Wild has built a £65 million business in five years by having the ability to trade in Australia, Europe, and the US as well as the UK. Policymakers need to help others by creating frameworks that simplify trade.
Supporting small businesses to trade internationally is going to be essential to the UK’s economic success. By supporting them today, we can see the dividends tomorrow in the form of more jobs, higher revenues, and a more resilient economy.
