Given the large trade deficit which Britain faces, attention has inevitably turned towards what the Government is doing to hold back or support export growth. United Kingdom Trade and Investment (UKTI) is the trade support body which provides advice to British companies which are looking to start exporting and to companies which already export. The quality of the services provided by UKTI is widely regarded to have improved and it has benefited from extra resources over recent years. However there are still a few key problems.
For example, as the House of Lords Committee on SMEs highlights, there is a real problem of awareness. Many UK businesses, especially SMEs are simply unaware of the potentially beneficial services that UKTI can provide which makes exporting a more difficult process than it otherwise would have been. UKTI can certainly be much more effective in informing SMEs about the services on offer.
One way to encourage it to do this is by increasing the accountability of UKTI managers for the body’s performance. This could involve making them responsible for the number of businesses UKTI helps, the quality of the service and the level of business satisfaction. As the London Chamber of Commerce and Industry suggests, this policy could help drive a better service responsible for exporters and potential exporters.
As HSBC has pointed out, intelligent importing is actually a very important way to increase the level of exports. The HSBC research shows that companies which carry out smart importing drive productivity and export growth. UKTI could be given a new responsibility for providing advice on how to carry out productivity enhancing imports which will in turn boost exports.
UK exporters can provide significant value added by bringing together many different raw materials and other components. British companies will often then use these imports to construct a more complex product which can then be sold abroad. This frees skilled workers and capital to be used on higher returning, higher productivity activities. Moreover, between 6% and 12% of the improvement in UK manufacturing productivity in the decade running up to the recession was as a result of buying more components from external markets. With this new responsibility, UKTI could help British firms to drive further productivity gains.
To generate robust export growth, it is crucial for the UK to increase trade with China. One of the weaknesses of UKTI which has consistently been mentioned by businesses is the lack of coordination with the FCO and BIS. The Public Accounts Committee for example pointed out that the limited joint-planning between the various organisations is holding back clear advice for businesses. This could have damaging consequences especially with respect to trade with China. The total volume of UK-China trade has increased significantly and reached a record high of £43 billion in 2013 and UK exports to China have doubled since 2009. This progress must continue if British exports are to flourish.
Nevertheless, the UK still has substantial growth capacity with respect to Chinese trade and remains below France and Germany in total trade volumes. The Government should ensure that that the Treasury, BIS, FCO, UKTI and any other relevant institutions have complete coordination over the UK’s strategy for relations with China. Specifically, UKTI should be adequately prepared and trained to help British businesses to export to all parts of China and not just to Beijing or Shanghai. Business opportunities in China should not just be confined to the major cities. This means that UKTI staff both in the UK and overseas should have a linguistic and cultural expertise as well as a thorough understanding of the legal and regulatory framework. This should form part of a comprehensive China strategy.
UKTI has definitely improved but it can still do more to give British businesses the soft tools they need to boost exports.