Global SMEs shun international trade to focus on domestic markets
New research suggests that SMEs across the world are shunning international trade to focus on their domestic markets amid global uncertainty.
The annual Global Business Monitor report from international business funder Bibby Financial Services, reveals that nearly two-thirds of SMEs (65%) are concerned about the state of the global economy and just 7% say international trade is the greatest growth opportunity for their business.
The study surveyed SME owners and decision makers in Canada, the Czech Republic, France, Germany, Hong Kong, the Republic of Ireland, the Netherlands, Poland, Singapore, the UK and the U.S.
Findings reveal that the political situation in the U.S. is seen as the greatest threat to global economic growth among SMEs (29%), followed by Brexit (20%) and conflict, war or terrorism (15%).
David Postings, global CEO of Bibby Financial Services, said:
“Our findings show that SMEs across the world remain concerned about the global economy. We have seen unprecedented geo-political change over the past 18 months, resulting in widespread uncertainty. This declining confidence in the global economy is leading many SME owners to retreat and focus on growth in their domestic markets.”
SMEs are significantly more confident about the prospects for their domestic economies. More than half (53%) describe the performance of their local economy over the past 12 months as good, while a third (33%) expect their local economy to improve over the next year. This rises to 53% amongst businesses in France.
Despite the forthcoming Federal Election on 24 September, for the second consecutive year, SMEs in Germany are most confident. Four-fifths of German businesses (81%) say their economy is currently performing well, up from 73% in 2016.
When asked about growth opportunities, less than one in ten SMEs (7%) see trading internationally as key to the growth of their businesses. Finding new market segments (12%), expanding domestically (12%) and developing new products and services (11%) are seen as the greatest opportunity for growth among business owners.
In relation to international trade, foreign exchange fluctuation is seen as the greatest obstacle by one in five businesses (20%), followed by government regulation (14%).
David said:
“There are a number of universal barriers to international trade that SMEs must overcome, including time-zones, cultural nuances, border regulations, legal practices and languages. However, our research reveals that currency volatility is the number one concern amongst SME owners today.
“Large and small businesses across the world have been impacted by foreign exchange fluctuation over the past year, and this is causing many SMEs to shy-away from international trade, to avoid such risk.
“However, there are significant opportunities available for businesses that are able to mitigate risk associated with currency volatility, by locking-in rates to protect against further fluctuations.”
Despite concerns about the global economy, SMEs are optimistic about their own future growth. Half (49%) of businesses said they’ve grown over the last 12 months, while more than half (55%) expect to grow in the next 12 months.
Canadian SMEs are most confident about future sales with 70% expecting growth. In contrast, SME owners in Hong Kong are the least confident in their local economy with just over a quarter (28%) expecting sales to grow and a third (35%) expecting sales to decline.
David added:
“While it is encouraging to see SMEs broadly confident about their own sales growth, more needs to be done to highlight the support available from public and private sectors to help businesses unlock growth opportunities from international trade.
“Businesses able to leverage the benefits of exporting and importing, whether this is finding new customer markets or forging new supply chains, have a higher propensity to achieve long-term growth.”
