UK businesses are looking to the overseas market for trading opportunities as domestic and western European trading partners remain unstable, according to a new report.
The study, to determine where future growth will come from, revealed that British companies are shifting their focus to the east, bucking the global trend for business to move back into developed markets.
According to the ‘Competing for Growth’ report, during the downturn 64% of UK business growth was generated from trading with western European countries, with a further 24% from the US and Canada. However, in the next two years British companies are predicting that just 48% of their growth will come from western Europe and 15% from the US and Canada.
Steve Varley, markets leader at Ernst & Young, who conducted the study, said: “The most recent statistics from the ONS show that exports from the UK to India and China combined (£11.8bn) are worth only half of our total exports to Ireland (£23.8bn) for example, demonstrating that there are huge opportunities for UK businesses in those markets.”
Despite signs of economic recovery, 86% of businesses expect the next two years to be challenging as the market will be more competitive. Furthermore, over half of UK respondents (55%) believe it will take them 18 months or more to break into a new geographical market.
However, the majority of British firms are shunning capital markets and plan to use cash reserves to fund growth.
Varley added: “That UK companies are saying they plan to fund growth from cash reserves supports what the Ernst & Young ITEM Club has been saying this year; UK company treasurers, particularly in larger organisations, are in a position to loosen the purse strings for investment opportunities and should be encouraged to do so, for the benefit of British business and the macro-economy.”
© Crimson Business Ltd. 2010