2020 Vision expert insight

Why UK businesses need to plan strategically for overseas growth

 

The ease of cross-border trade will open up new opportunities for UK businesses trading in physical and digital markets. In addition, supply chain operations may be enhanced by Foreign Direct Investment (FDI) says Michael Boyd, Managing Director of UK Trade & Investment (UKTI).

Michael Boyd has been Managing Director of UK Trade & Investment (UKTI) since 2011. He is also a director in the Department of Business, Innovation & Skills. Prior to this, he was a member of the Global Executive Board and International Council at Ernst & Young.

Michael Boyd

overseas growth at a glance

Export will continue to be a key opportunity for businesses over the next five years. I think there will be increasing globalisation and a greater openness from businesses of all sizes to think more strategically about the opportunities in overseas markets. The Government have ambitious targets for exports to reach one trillion pounds by 2020, with 100,000 more companies exporting by 20201.

Opportunities in fast-growing markets

The UK is a great place to export from, with access to the EU and free or preferential trade arrangements with many non-EU countries. Exporting can benefit everyone from micro businesses taking their first steps into the global marketplace through e-exporting, all the way up to big firms with great market share in the UK.

We know from our research that companies who export are more profitable, more productive and more innovative than those that don’t. They are also more likely to survive any economic downturn. That’s why UK businesses need to plan strategically for overseas growth. It really comes down to mindset and UK businesses being ready to take advantage of new opportunities, such as those in the world’s fastest-growing economies. To this end, UKTI has published a guide to doing business in China, which is designed to help UK based SMEs tackle this market.

Seizing technological advantage

Companies also need to be ready to take advantage of the huge growth of online retail spend, which UKTI is supporting with its E-Exporting Programme2. The continuing fast-paced growth in technology means that companies need to ensure that they are ahead of the game on issues like cyber-attacks, which cost the UK economy an estimated £34bn a year3. However, in challenge there is often opportunity, and the cyber security sector in the UK is going from strength to strength, employing over 40,000 people and increasing exports by 22 percent in 2013 – the highest growth rate in a global list of 53 major economies4.

The benefits of inward investment

Of course, there are opportunities for UK businesses to benefit from inward investment too. For example, in infrastructure, the UK’s appeal to global investors has attracted around £18bn of inward investment since 2010, creating jobs and growth in the construction sector and supporting significant regeneration in areas like Manchester city centre or Battersea Power Station5.

In 2014, foreign direct investment created 84,603 jobs and safeguarded another 23,0556. The types of jobs created are disproportionately high-value and investors also bring their Intellectual Property with them; this technology transfer can help the UK supply chain plug gaps and make them more efficient, strengthening business as a whole.

Wider economic impact

Openness to foreign ideas and technology can have dramatic effects on the local economy. The Nissan car plant in Sunderland is probably one of the most successful inward investment stories of the last 30 years. It is now the most productive car plant in Europe. The benefits to the people and businesses of the North East are obvious.

In an age where people, capital and ideas cross borders with ease, we want to make the most of the opportunity this presents. The UK is already acknowledged as one of the best locations in the world to run a business. We have set out to target the companies we believe have the greatest potential and encourage them to set up their headquarters in the UK. Who would not want the next Apple or Microsoft to be headquartered in the UK?

UKTI’s Global Entrepreneur Programme (GEP) aims to encourage the world’s best sustainable, early-stage companies and entrepreneurs to set up their global HQ in the UK. Since the programme was introduced in 2004, approximately £1bn of venture capital has been raised7, and in 2014/15 GEP delivered 89 inward investments from 30 different countries.8

Ambitious targets

The UK was among the very first countries in the world to recognise the enormous benefits of foreign investment and encourage it. Now nearly all countries in the world seek it out. Despite the ever-growing competition, the UK is breaking records in attracting foreign businesses to the UK. In fact, our stock of Foreign Direct Investment (FDI) in 2014 broke the £1trillion and we have ambitious targets for this to reach £1.5trillion by 20209. It will create more jobs, skills and is a vital part of a balanced economy.

We want to maintain our excellent position as the most favoured location in Europe for inward investment. We’re also keen to become the number one location in Europe for investment from high-growth markets. FDI in Britain is a big part of our success. It will be in the future.

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