Research* just published by FSB (Federation of Small Businesses) reveals that UK small firms are kept at distance from overseas markets by complex customs procedures. The Customs Clearance Report which looks at small businesses’ experiences of exporting and importing, finds that nearly one in ten (9%) small firms who used to trade internationally have stopped doing so within the past 5 years – the volume of paperwork, overall cost burden and supply chain and logistical issues have been cited as main drivers.
Those small firms who have continued to trade internationally have to battle on several fronts: six in ten (61%) identifying high shipping costs as the top challenge, followed by losses and delays in transit (56%) and lack of guidance on customs procedures (45%). Unlike big corporates, most small firms don’t have specialised in-house resources to deal with customs paperwork.
On a broader scale, as a result of severe disruption to the global supply chain caused by the Russian invasion of Ukraine, an overwhelming majority (81%) of small firms have been affected by cost increases and shortages of goods that originate from outside the UK.
In terms of trading partners, Europe continues to be the top export and origin market by global for small firms with 93% of small exporters moving goods between the UK and other European countries. Ireland heads the list followed by Germany and France for exports and in regard to imports Germany, the USA and China are the three most popular origin markets.
In light of the findings, FSB is urging the Government to lower the overall costs of trade and deliver a small business-friendly customs declaration by:
- Delivering an effective and small business-friendly Single Trade Window, an online portal that will bring in a ‘once and done’ approach to Government collection of the data traders need to provide to export or import.
- Targeting further resources towards small businesses with high export potential. More detailed resources should be developed for businesses in sectors that say they find a lack of guidance particularly difficult.
- Committing to passing and implementing the Electronic Trade Documents Bill. The Department for Business and Trade should raise awareness of and promote the advantages of digital trade documents via its new Help to Grow site.
- Adopting a ‘think small first’ approach to customs policy development. Policymakers must place small businesses at the heart of new trade and customs structures to avoid disproportionate cost or administrative burdens. This should include commitments to robust piloting and staggered implementation timelines. Government should also commit to raising the de minimis customs duty threshold to £1,000.
Commenting on the report and its findings, Tina McKenzie (FSB Policy Chair):
Small businesses are eager to grow their businesses overseas, but our findings show there are undeniable tariff and non-tariff barriers that prevent these firms from reaching their full potential and deter potential high-growth exporters.
Our members consistently tell us the costs, time and administrative burden of trade are the reasons why they give up overseas markets. Complex customs procedures and high costs also put foreign consumers out of reach and create an uneven playing field for small firms. But on the bright side, this means with the right structure in place and clear guidance on navigating the customs procedures, small businesses will thrive and flourish in the global market.
The UK’s new status as an independent trading nation gives policymakers a unique opportunity to build an effective and streamlined trade infrastructure from the ground up, with the need to place small business’ interests at its heart.
You can’t grow the UK economy without growing international trade. And at a time when the domestic economy is in a slow-down, small firms should be looking to tap into countries that have much better growth rates. UK success overseas helps the economy here at home.”
*FSB surveyed 807 small businesses on their experiences of international trade and their concerns and responses to global supply chain disruption between August and September 2022.
