Researchers found a $1.5 trillion gap in available trade finance around the globe, a void that may be holding small and medium-sized businesses (SMBs) back from international expansion. Now, new research from WorldFirst suggests a dramatic decline in the number of SMBs trading across borders.
While there is no single cause for the drop, analysts for WorldFirst’s Global Trade Tracker report highlighted a slew of circumstances preventing small businesses from taking the leap into internationalization. The current political and economic climate in the U.K., for instance, underscores a multitude of factors impacting global trade.
“After a year of Sterling fluctuation, inflation fears and obfuscation around the government’s Brexit negotiations, it’s little surprise that our [SMBs’] appetite to trade internationally is at rock bottom,” said WorldFirst chief economist Jeremy Cook. “There were too many unknowns in 2017, and international trade suffered as a result. While hedging data may suggest that it is business as usual for internationally focused [SMBs], the truth is that the circumstances they are dealing with are incredibly tough. Short-term spikes in Sterling are leapt upon in a bid to offset higher input prices caused by higher energy costs and the legacy of the devalued pound while margins remain tight.”
The news isn’t all negative, though, Cook added.
“The only positive to come from such a negative year may be that U.K. [SMBs] are seemingly drowning out the Brexit noise,” he continued. “Since the end of 2016, a significantly larger contingent of small businesses feel positive about leaving the EU. The pound is stronger than it’s been since the referendum and many [SMBs] may finally have plans in place for a post-Brexit world. We can only hope this translates into businesses dusting themselves off and getting back to international trading in 2018.”
As for the 2017 data, the news is pretty bleak. Here are the stats:
26 percent | Portion of small businesses that were trading internationally in the U.K. in Q4 2017, a massive dip from 52 percent of exporters at the end of 2016. According to analysts, this means 1.5 million fewer SMBs were a part of the global trading market headed into 2018.
75 percent | Percentage of small firms that expect international trade to decline or remain stagnant over the coming year. WorldFirst noted that despite the drop in the number of small firms trading globally, though, there has been an increase in the global reach of SMBs that are trading.
55 percent| The decline in payment flows from the U.K. to Russia, making the country the largest loser in terms of the U.K.’s drop in small business exporting. Vietnam saw a 49 percent drop in payment flows from the U.K., though the report found an overall increase in payment flows to Eastern Europe.
29 percent | Portion of SMBs that planned to export in Q4 2017, the lowest figure in a year. It’s also a 2 percent drop from Q1 2017 when 31 percent of small businesses said they planned to export in Q2. Researchers at WorldFirst called this particularly concerning, considering the U.K. government spent 2017 promoting international trade to the small business community.
38 percent | Portion of SMBs that expected the economy to grow by 5 percent or more toward the end of last year, a drop from the 43 percent that said the same in the Q1 2017. This suggests small businesses’ optimism for the U.K. was lackluster headed into 2018.
41 percent | Percentage of small businesses that had a positive outlook on Brexit by Q3 2017, an increase from Q4 2016 when just one-third of small businesses had such an outlook.
$62,000 | The average value of a trade deal for U.K. SMBs. Researchers said this value has remained consistent between Q3 and Q4 of last year, though it is a $4,000 decline in average trading amounts over the same period in 2016.