Promoting Britain's Exporters
A side-effect of the Brexit referendum has been a renewal of interest in Britain’s exporters. This is timely: Britain’s share of global exports has been sliding for many years, and we lag behind our main competitors, particularly in goods exports (although financial and business services are doing better). There are also fears that new trade barriers with Europe following any Brexit agreement are likely to hit exporters to our largest existing market: hence, the need to find new markets for our products.
Britain, like most countries, has long accepted that there is a role for government involvement in assisting develop export ties, and so has several commercial diplomats linked to embassies and consulates abroad. However, since the Brexit referendum, these functions have been moved from the old UK Trade and Investment (UKTI) agency to the new Department for International Trade (DIT), and considerable new expert resources have been poured into trying to improve the efficacy of export and investment promotion. This promotion involves not just marketing of Britain to foreign customers, but more importantly the sharing of expertise, contacts and local know-how between exporting firms: something which is potentially of most use to those small and medium enterprises which might consider exporting, but would find it difficult to break into markets without help, and learning from others’ experiences. This is important as 99% of the businesses in the UK are small and medium businesses and statistics show that very high proportion of the businesses have been trying to explore the international market.
From our point-of-view in Loughborough, our TRANSIT (post-Brexit trade and investment) Research Interest Group has identified export promotion as an area, both where we have existing expertise (from the Economics, International Business and Marketing groups), which can be pooled, but also in which there are considerable expressions of interest from the Confederation of British Industry (CBI) and from the DIT’s burgeoning analysis team. Hence, we see this as an area in which we can develop reputation and impact in coming years, as well as developing appropriate collaborations with other universities.
Our preliminary survey of the economic literature has indicated that spending on commercial diplomacy and export promotion does indeed lead to increased export participation. However, previous work by Elena Georgiadou (focusing on the experiences of Greece – another country with a big challenge of increasing export participation) shows that there are possibilities of both organisational and methodological innovation to improve performance, while work by our colleagues in the marketing group indicates that firms have perhaps been underwhelmed by the support available in the past.
Tien-Der Jerry Han carried out a series of surveys of different export promotion setups in different countries, showing huge variations in the ways in which different countries operate, with some (e.g. Australia) running a largely government-led export promotion system, operating via agencies and commercial diplomats, while others (e.g. Germany) have greater private sector and bank involvement. The UK’s own setup is changing very fast in this regard, with heavy reorganisation following the creation of the DIT.
Shan Rambukwella, from the University of Derby, working with us, met with two senior DIT officials who are based in Colombo (CMB), Sri Lanka, who were able to provide very useful information on their operation. They have found that being based with the embassy helps DIT CMB to work closely with Sri Lankan officials/government as it supports the brand presence (Britain – a brand associated with good quality) and opens many doors which are not possible with even very high financial capabilities.
In addition, missions in both countries have strong links, helping DIT CMB to influence Sri Lankan Government officials. Furthermore, as a public facing organisation, DIT CMB works with UKVI and the British Council to improve the image of Britain and deliver the same message across all institutions.
Companies approach them via several routes including contacting the DIT in Colombo directly which is the most common approach. The other methods include through UK bodies or referrals from DIT posts in other countries. An initial vetting process helps to identify genuine clients, protecting the mission’s reputation. Once a genuine client is identified, the British commercial diplomats are then able to offer quite a flexible range of services from, on the one hand, a tailor-made assessment and package of advice, for which a fee will be charged. On the other end, they organise commercial events (in which potential exporters can meet prospective local partners): for example, during the visits of UK sporting teams to the island nation.
The DIT has developed ties with local Sri Lankan trade associations, such as Ceylon Chamber of Commerce and its UK trading council (Council for Business with Britain). Maintaining a strong presence in local business networks such as SL UK Society, which includes both British and Sri Lankan citizens, has allowed DIT to identify potential opportunities for future business. The society was started as a social network, but now acts as a business network too as the individuals found some business opportunities among the members.
As part of its reorganisation, DIT has divided the world into nine regions. Sri Lanka is covered by the ‘India Network’, with India and Bangladesh. New Delhi operates as the head office for the Indian subcontinent. The DIT organisational structure can be found at www.trade.gov.uk.
Back in the UK, industry (such as the CBI) is very keen on the DIT developing its export promotion effort. However, given the many calls upon UK budgets, this will depend upon the DIT showing more rigorous evidence of the contribution of its revitalised export promotion services, as well as upon convincing Treasury ministers that resources are being well directed, and that information on best practice is being adopted across the export promotion agencies. From our point-of-view in the School of Business and Economics, we see this as an area where academic expertise can help: working with civil servants and industry to review the effectiveness of export promotion spending, in terms of allocation so that efforts have real additionality – leading to changes in company export behaviour – rather than simply supporting larger exporters who perhaps need less help in exporting. In addition, we hope to be able to review the structures (for example, the complications of lines of communication where DIT employees are housed in Foreign Office establishments), and the use of consultants and other sources, who may be able to bring experiences from other countries’ export promotion activities. Last spring, we helped organise a roundtable forum with representatives of the DIT, industry and academics, including specialists in the field. We see this as an important area where the School of Business and Economics can contribute to the future export success of UK firms.