UK can unlock £9bn by helping more SMEs to export online

The UK could generate £9.3 billion in economic value and create more than 150,000 jobs by helping more SMEs to export goods through e-commerce, new research shows.

Economic modelling from the Social Market Foundation (SMF) shows that there are “significant” gains to be made for the UK economy by helping more firms to generate export sales through e-commerce. The findings of the independently produced report, Just a Click Away, have been supported by the Institute of Export & International Trade. The SMF said that by increasing SME e-commerce exports, ministers could raise economic growth and help ease the pressure on public finances.

While merchandise exports across other advanced economies are up 3.5% since the end of 2019, the UK’s have fallen by 21%1. SMF modelling shows the potential gains for UK businesses, employment and GDP could see as many as 70,000 more SMEs exporting, with their turnover rising by £12.4 billion, resulting in an economic gain of £9.3 billion and supporting an additional 152,000 jobs.

More than 85,000 UK small and medium sized businesses sell on Amazon, of which more than more than half already export overseas. While these small businesses generated more than £3bn in export sales in 2021, overall exports declined from £3.5bn in 2020, partly as a result of the pandemic and increased administration for cross-border sellers and customers following Brexit. However, exports beyond the EU are growing amongst SMEs selling on Amazon, up 15% from 2020.

Amazon encourages small businesses to look at export opportunities in the EU and around the world and provides a range of products and services to support them, including a Global Selling programme, which allows UK businesses to list and sell products on any of Amazon’s 21 stores including the USA, Australia, and Japan, with access to over 200 million Prime account holders. Meanwhile, Amazon’s European Fulfilment Network, which lets sellers transfer stock across Europe, already helps tens of thousands of SMEs to sell between the UK and EU.

The SMF report is based on an Opinium survey of 500 British SMEs and in-depth interviews with business owners from across the UK. It finds that smaller British firms are less likely to sell online than their equivalents in high-export countries. Only 6% of UK medium-sized firms report making e-commerce sales to the rest of the world. This compares with 9% in Austria and 12% in Ireland2. Among businesses that do not currently export, customs issues were the most frequently mentioned obstacle to doing so (30%), with Logistics (25%) and tariffs (23%) second and third.

Based on the experiences of those businesses, the SMF recommended a series of changes to UK export and trade policy to boost e-commerce exports. Recommendations include establishing a time-limited e-commerce exports taskforce, including relevant industry and academic and civil society representatives, to help identify the priority policy areas, which could include: 1) developing more tailored guidance for small businesses looking to participate in e-commerce exports,  2) building an industry-wide information and awareness strategy so businesses can be signposted to the right information and support, and 3) exploring further opportunities for government, business groups and e-commerce firms to collaborate. Also proposed is the creation of a new Office for E-Commerce and Digital Trade (OE-CDT), sitting within the Department for International Trade, to lead on policy with respect to cross-border e-commerce.

SME Publications/ SME XPO 2024

Richard Hyde, senior researcher at the SMF, said: “E-commerce gives even the smallest business the scope to sell to new customers in other countries. Our modelling shows that policies helping more British firms to conduct e-commerce exports could deliver a real boost to the economy and jobs. That’s a valuable prize at the best of times, but when ministers having to take tough choices to balance the public finances, boosting growth jobs and tax receipts by helping British firms sell more abroad should be a high priority.”

John Boumphrey, UK Country Manager for Amazon said: “Online stores including Amazon offer a fantastic route for small businesses to reach more customers – both here in the UK and overseas. Embracing e-commerce, and the export opportunities that come with it, can help small businesses and boost the UK’s economy. We are keen to work with government and wider industry to help more small businesses to capitalise on the opportunities that e-commerce exports can provide.”

Greg Hands MP, Minister of State for Trade Policy, said: “Small businesses are the backbone of our economy, and this report highlights why it’s so important we continue our drive to get more UK businesses exporting around the world. We know that when businesses export, it means more jobs, higher wages and a stronger economy, which is why this Government is helping more of them get on the exporting ladder through events such as International Trade Week.”

Marco Forgione, Director General of the Institute of Export & International Trade, said: “SMEs are the lifeblood of the UK economy, with 99.9% of UK businesses classified as a small- or medium-sized enterprise, yet less than 10% of UK SMEs engage in cross-border trade. Research shows that businesses which export are more profitable, more sustainable and employ more people than their non-exporting counterparts. It is essential that UK SMEs have access to the resources needed to grow their exports, and e-commerce and online marketplaces are excellent tools to do so. Policymakers need to understand the obstacles that currently impede more use of these platforms, and invest in resources to build confidence in businesses and encourage greater uptake of them. The joint SMF and Amazon report, which we have been pleased to contribute to, further highlights the urgent need for determined action to get SMEs exporting, benefits this would bring and the important role e-commerce has to play.”

SME Publications/ SME XPO 2024