SMEs reluctant to expand internationally

UK-based SMEs are reluctant to expand overseas, with only a quarter planning to increase their international sales over the next year, according to the latest survey by Baker Tilly.

The survey of 750 UK SMEs found that the main reason holding businesses back is perceived cost, with 90 percent of respondents indicating that international expansion is too expensive, while 70 percent said they feared a loss of control.

The survey showed a marked difference between London and the rest of the UK. While almost half (44 percent) of London-based SMEs were active internationally, in most other regions, the equivalent figure was generally between 20-30 percent, ranging from 20 percent in Wales and Northern Ireland to 31 percent in Yorkshire and the North East.

The survey found that some industry sectors, by their nature, were more active in international markets. Between 60-70 percent of manufacturing, food and drink, and energy and natural resources companies reported that they have international or export operations, and over 50 percent of manufacturing and energy and natural resources businesses said they plan to do even more overseas next year.

Rob Donaldson, Baker Tilly’s head of M&A and private equity says international expansion is not for the faint-hearted: “It is clear that many SMEs do not feel sufficiently comfortable coming out of a tough recession to take the risks implied by going international.

“Overseas expansion can be a great opportunity for some, but there are pitfalls for the inexperienced or unprepared, and businesses would be wise to seek advice and take advantage of the networks and opportunities provided by UK Trade and Investment or the British Chambers of Commerce.

“One opportunity that is often overlooked is expanding through cross border M&A. This is normally perceived as high risk but in some cases, it can be the low risk option, providing the best way of breaking into an unfamiliar market rather than trying to build from scratch.”