Brexit has dented Britain’s exports when we should be relaunching our global brand
It is fair to say that this government is facing a myriad of challenges. Having pushed Brexit through and just about overcome the pandemic, the government is now facing war in Ukraine and a cost-of-living crisis at home. On top of this, the structural challenges of “levelling up”, boosting growth, and making a success of Brexit still loom large.
Work is being done on each of these areas but one thing flies under the radar – exports. SMEs employ 16.3 million people in the UK; the ones that export are 21 per cent more productive, make more money and pay higher wages than those that do not. But UK SMEs still export less than their counterparts in Europe, by as much as half compared to Germany and Denmark, or even a third of Slovenia’s efforts.
Brexit and the pandemic have compounded the problem. The last two years have been one of the most challenging periods on record for UK exporters. The value and number of UK SME goods exports are falling, despite a brief rebound which followed an initial massive £5.6bn fall after the UK’s departure from the single market.
The government has given itself a £1tn export target. But to do this, it needs to put fiscal policy to work. An export tax credit, for example, could draw inspiration from other successful policies such as the R&D tax credit, to allow businesses to offset any expenditure in the pursuit of exports against their tax bill. It would help de-risk export exploration for businesses and generate new additional exporting activity – therefore doing so at minimal cost to the treasury.
The UK should take a stronger leadership position on international trade, and push for WTO reform from within. This should be done with a particular focus on setting out a new global agreement in services and a clear plan for digital trade – both of which are of critical importance for the UK economy.
Boosting exports is not just a job for central Government. Local institutions including Mayors, universities, local authorities and beyond have a key role to play in shifting the culture towards a pro-exports mindset within the business community. Universities can be of particular value in sharing cultural practices from around the world, helping bring fruitful export markets to the attention of growing businesses, and supporting them in breaching this new ground.
In the context of Ukraine, this seems small fry. But the government needs to ensure our businesses are able to launch themselves globally. It is also a useful tool to help address the range of other challenges it faces.
Given the important role for local institutions to play in this process – and the widespread nature of our SMEs – there is a significant “levelling up” element to this. Exports would bring more business to all regions of the UK. More broadly, the boost exporting gives to business would bring much-needed economic growth and with it increased wages for millions, helping face down the rising cost of living.
But crucially, these proposals are necessary to mitigate the damage that Brexit has done to our exports regime. Further, if done properly, there is a lot of scope here for a tangible Brexit benefit. Being in control of our own trade policy opens up multiple new markets around the world, but the government must do more to encourage and help businesses access them.
The size of the prize is enormous, but it will be no mean feat to reach it. It will take a concerted effort not just from across government and the country to make sure that businesses have the access and incentives they need to export freely.