Expanding overseas
Article Date: Jun 03 2005
Take cover
In certain circumstances, exporters can, for a price, buy insurance against the risk of an overseas customer failing to pay for the goods or services provided. Private companies, such as European-owned Trade Indemnity, sometimes offer such cover, but the biggest player is the Export Credits Guarantee Department (ECGD), part of the Department of Trade and Industry.
For example, the ECGD’s supplier credit finance facility can fund up to 85 per cent of the value of a contract for UK exporters of light capital or capital goods and services with a two-year credit at a fixed interest rate. This can be combined with insurance covering the period before, allowing the exporter to be able to draw on the supplier credit finance.
One satisfied recent ECGD client is Omega Foundry Machinery, which has recently completed a ‘substantial’ contract in Turkey. ‘That would not have been possible without the availability of supplier credit finance,’ reflects Hazel Brown, Omega’s financial director.
The ECGD sets its premiums in relation to the country and risk in question and with an eye to chances of recovering claims from overseas defaulters and meeting its own formal obligation to break even. The agency can play a key role in large contracts, involving government-to-government deals for infrastructure and defence projects.
How helpful is Government?
Apart from ECGD and consular assistance abroad, the Government has other ways to help exporters. UK Trade & Investment, with specialist staff in Britain and embassies around the world, which provides marketing scholarships abroad for UK executives, operates a Passport to Export programme, launched three years ago specifically for small-to-medium-sized businesses.
According to UK Trade, some 3,500 companies have so far joined the programme, which provides training, planning and trips to overseas markets. UK Trade also publishes a list of ‘Do’s and Don’t’s’ for exporters and a ten-point exporters’ checklist.
Some companies are well pleased with the programme, such as London-based drug and vaccine delivery technology specialist Lipoxen Technologies, which the other day signed an agreement with the Serum Institute of India, the world’s leading vaccine maker, to develop eight new Lipoxen products in India.
The company’s chief executive Scott Maguire enthuses, ‘UK Trade & Investment’s ability to provide specialist sector knowledge as well as local market support significantly contributed to our success in winning this business.’
However, not everyone is cheering. The issue of Government-sponsored trade missions, seen as vital for smaller, would-be, exporters without the access to local representation available to big groups, is particularly sensitive.
The London Chamber of Commerce complains that the money available for grants to take companies on trade missions and to exhibitions is being cut from £23 million to £8 million over two years. Funds per delegate are falling from £2,500 to £1,700 this year and will be phased out altogether in 2006.
A frequent complaint is that the Government is keener to attract investment into Britain by foreign companies than to help British companies outperform in export markets. Tudor Photographics, for one, says it is competing overseas on the one hand with Italian companies that are benefiting from domestic rent subsidies for exporters and on the other with companies ‘given perks’ to set up in Britain.
Trade & Investment spokesman Andy Towers says trade mission support is being ‘refocused, not abolished. We are in the middle of a consultation and the intention is to devolve funds to the regions and highlight smaller companies.’ State aid is, in theory at least, ‘tightly controlled’ by EU rules.
Nearly fifty years ago, Prime Minister Harold Macmillan proclaimed, ‘Exporting can be fun’. That may not be your experience, but there are still profits to be made out there.
The export checklist
- Be prepared
- Do your homework
- Make a plan
- Choose a sales route
- Promote your product
- Visit the market
- Get the legal side right
- Get paid on time
- Transport goods effectively
- Maintain after-sales effort
*source: UK Trade & Investment
