Why are UK SMEs not accessing global supply chains?

The global trade landscape is vital for many UK SMEs, offering opportunities to access new markets, diversify revenue streams, and secure goods and services that aren’t readily available domestically. Data from the Business Insights and Conditions Survey (BICs) data—waves 118 and 119 – shows however that over three quarters of UK SMEs are not engaging in import or export activities.

Challenges from tariffs, fluctuating exchange rates, and complex custom procedures means that many businesses are questioning whether the benefits outweigh the drawbacks for importing and exporting.

In the second blog of our supply chain series, we explore the current state of import and export activity among UK SMEs, the reasons behind low participation rates, and the advantages and disadvantages of engaging with international markets.

Read our first article on the current challenges and trends that UK SMEs are facing here.

What are the pros and cons of importing and exporting?

The advantages of exporting and importing cannot be discounted. Both importing and exporting have proven themselves to be essential for promoting economic growth and development by creating new jobs, meeting and increasing demand for goods/services, accessing new customers, and diversifying markets (and so, reducing dependence on a single market). Importing, specifically, allows for businesses to access a wider range of goods that would otherwise not be available to them domestically.

The disadvantages that come with importing and exporting could be a part of the reason why there are high levels of businesses not engaging in these activities, although it is entirely feasible that for these businesses exporting and importing are not essential to their business model. Included in these disadvantages are:

Tariffs and customs procedures
Fluctuations in currency exchange rates
Transportation costs
Communication difficulties caused by language barriers
Difficulties in navigating the import and export process due to differences in other countries’ legal systems
Ensuring the quality of imported goods due to differences in manufacturing standards or regulations
Political instability, particularly with the current conflicts

While historic data for these figures is limited, as it has only been reported on in three of the waves (starting in March 2024), we can assume that the proportion of businesses who are refraining from exporting or importing, for now, will remain consistent. Of course, this is under the assumption that no big changes will be occurring to the current supply chain landscape, for better or for worse.

Please note that following the US election, it is still uncertain as to whether there will be any changes that impact the US-UK bilateral relations. Find out more in our article here.

What are the current trends for import and export to EU and non-EU markets?

Of those who have exported, under half, at 48.4%, exported to both the EU and non-EU countries, with a similar proportion exporting to only the EU (22.9%) and only to non-EU (20.6%) countries. A slightly different picture is seen for those importing, with over a third (38.4%) importing from both the EU and non-EU countries. In addition, 34.8% import only from the EU, while a lower percentage at 21.2% import from only non-EU countries.

What does this show?

While importing figures have seen some variance year-on-year, there have not been major changes to the proportion of businesses importing from the EU and non-EU countries. On the other hand, the proportion of businesses exporting to only EU countries has decreased by 32% from September 2022, with the percentage of those exporting to only non-EU countries remaining fairly consistent. At first glance, this may indicate that the expected effects from Brexit are now being felt by SMEs, but the proportion of businesses who are exporting to both EU and non-EU countries increased by a similar percentage, at 26%. What this perhaps suggests is that more businesses who originally only exported to the EU are now looking outside of the EU when it comes to exporting their goods or services.

What exporting and importing challenges are businesses facing?

The main exporting challenges that businesses are facing are changes in exchange rates, additional paperwork, changes in transportation costs, and reduced demand for products and services. However, the majority, at 62%, did not experience an increase in any exporting challenges.

As with exporting, additional paperwork and change in transportation costs are top importing challenges alongside disruption at UK borders and customs duties or levies. However, as also seen with exporting, 63% did not experience an increase in any of the listed challenges.

It is encouraging to see that the majority have not seen an increase in the challenges they face when it comes to exporting or importing. Nevertheless, it is important to remember that this does not mean that these challenges that businesses face have lessened. More still needs to be done to support UK businesses’ exporting and importing endeavours.

Closing thoughts

While many businesses are apparently avoiding international trade due to factors like exchange rate and high transportation costs, or even due to the nature of their business models, those who do choose to import and export will likely see benefits of doing so, from diversifying markets to accessing new resources.

Encouragingly, the trends indicate that some businesses are starting to broaden their horizons, with more SMEs exporting to both EU and non-EU markets post-Brexit. However, more needs to be done to provide clear guidance, reduce administrative burdens, and support businesses as they navigate the complexities of international trade. As the global trade environment continues to evolve, UK SMEs must have the tools, resources, and confidence to access global supply chains. This should remain a priority for policymakers and industry stakeholders alike.

Our next blog in the series will examine how businesses are navigating these complexities, and what more needs to be done to support UK SMEs with global trade.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

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