SMEs make up 99.9% of UK businesses, employing 16.3 million people. They are at the heart of the UK economy. Yet historically, they have been far more reluctant to export than their international rivals. Only one in 10 British businesses export; far fewer than many of our European counterparts.
In a major new paper, CPS research fellow and former Government adviser Nick King puts forward a series of ideas which can make the UK an exporting powerhouse, following the twin shocks of Brexit and Covid-19 – with a particular focus on how to help SMEs.
‘Trading Up’ proposes a new Export Tax Credit to incentivise SMEs to export. Modelled on similar successful interventions such as the R&D Tax Credit, it would allow businesses to offset any spending in the pursuit of export growth against their profits and eventual tax bill. This measure would give firms more confidence to export, helping the Government reach its ambitious target of £1 trillion in exports per annum by 2030.
The paper also argues that the UK Government should take a leading international role in advocating for free and fair trade, putting trade at the heart of its diplomatic as well as economic strategy. The UK must use its independent seat at the WTO to drive through much-needed reform and help equip the organisation for modern challenges. The rules on trade in services, for example, were written before the creation of the internet and smartphone
As well as setting out how the UK can be a leader in services and digital trade, the report shows how the UK can digitise its operations on the ground, improving its customs infrastructure and lessening the burden on individual firms. It particularly points to Singapore’s TradeNet scheme as a model to follow.
The Rt Hon Anne-Marie Trevelyan MP, International Trade Secretary said:
“Small businesses are vital to our economy, and small exporters in particular are crucial to our international outlook as we strike up new trade deals around the world.
“Our Race to a Trillion is about getting more businesses exporting, and our Export Strategy will help SMEs reach for these exciting new opportunities by increasing access to support services and export finance, connecting them to our trade advisors, and helping them promote their products on the world stage through our Tradeshow Programme.”
Nick King, report author and CPS Research Fellow, said:
“SMEs who export are more productive, make more money and pay higher wages than those who do not. If we boost trade, it is the economy that benefits. That is why the Government needs to incentivise SMEs to export with an Export Tax Credit, and support them along the way. The dividends are universal.”