Issue brief - Export Support & UKTI Strategy

UK manufacturers have become more dependent on exports as the decisions by major UK customers to buy from abroad or offshore production have weakened growth in the home market. While the home market remains important, exporting offers the best opportunities for expansion for many companies. In 2006 exports grew by 18%, the strongest performance for at least ten tears

Previous research suggested that UK companies are too focussed on established markets and are not exploring the opportunities presented by a range of fast growing economies across the globe. However, new EEF research has revealed a large increase in the number of companies viewing emerging economies such as China and India as growth opportunities.

Possibly even more important than these two countries is the rise of Eastern Europe. The number of companies rating the new EU members as a growth opportunity has trebled since 2004. Meanwhile, the other parts of Eastern Europe are in second place behind the EU15 as the biggest perceived opportunity over the next five years.

However two issues will have a crucial bearing on whether UK companies are able to sustain their current performance and, take advantage of stronger growth in new markets:

1. Inexperience of companies in growth markets. Less than 40% of manufacturers that see growth opportunities in China are experienced in that market (experience being defined as 5 years or more exposure) and 20% have no involvement. Levels of experience amongst those interested in the new EU and Eastern Europe are similarly low.
2. The ability of UKTI to support companies with the correct strategy and adequate resources. UKTI strategy was revamped in 2006 to place a greater focus on emerging markets such as China and India. In addition, funding for export support will have fallen a third between 2003/04 and 2007/08.

1. UKTI should be come a market-led and customer focused organisation organisation. To achieve this consistent investment must be made in recruiting people who are able to deliver on this vision and developing existing staff. This will ensure that the wide variety of needs of current and potential customers can be met.

2. Research suggests that UKTI is right to focus greater resources on emerging markets such as Brazil, Russia, China and India. However, the high level of interest shown in Central and Eastern Europe means that UKTI must avoid the dangers of becoming too pre-occupied with higher profile markets and neglecting other areas where there are equal demands for services.

3. EEF research shows a clear link between exporting and increased productivity. However, this should not lead to a focus on targets to promote the number of companies that are exporters. Instead UKTI should focus on developing the capabilities, contacts and knowledge of companies for whom exporting is a central part of their strategy and which have the potential to make a significant contribution to the revenues the UK earns from exporting.

4. Whilst there is increased scope for UKTI to raise revenues from selling research to private companies it should not begin to compete with services provided by the private sector.

5. UKTI should develop a compelling proposition for selling UK engineering and manufacturing abroad. This should reflect the progress the sector has made in transforming itself into a modern, dynamic contributor to a high value economy. EEF research suggests this should be based on three concepts, quality, design and innovation. This must be backed by high level, visible support from senior Ministers at key events in emerging markets.

6. Priorities must be set as to which services are best organised nationally and which are best developed in the regions. This would help to address the current duplication of activity, inconsistency of service and dilution of expertise.

7. In the forthcoming Comprehensive Spending Review the government must back UKTI with the funding required to deliver a high quality service. At the very least, it must resist any further cut in the funding available to UKTI.