By Deann Evans
Copyright newstatesman
The UK’s economic future depends on its smallest businesses. Every café, bookshop, and online store is a thread in the national fabric.
Together, small and medium-sized businesses (SMBs) employ over 16 million people and account for 99 per cent of all UK firms. They create jobs, improve our high streets, and bolster the nation’s economic resilience.
Their success is Britain’s success.
But here’s the problem: UK SMBs are underperforming internationally. Only one in ten of them export to other countries – half that of German small businesses. When every pound of exported goods helps propel the UK toward higher-value growth, this potential cannot be left untapped.
International trade isn’t a luxury, it’s a lifeline. It boosts revenue, drives innovation and creates jobs, fuelling the economy and, in turn, providing more fiscal headroom for the government.
In fact, 97 per cent of businesses across major markets rely on international trade to thrive, according to Shopify’s data. Global ambition also drives local prosperity: around 15 per cent of the total value of sales on Shopify are cross-border purchases.
If economic growth is the government’s top priority, then making international trade more accessible for SMBs must be at the heart of its strategy.
On a positive note, the UK government recognises the vital role of SMBs in achieving that mission. Its Backing Your Business strategy champions SMBs as the “engine room” of the economy, and recognises that, to date, there have been too many barriers holding entrepreneurs and small businesses back. Meanwhile, modern partnerships such as the Canada-UK Trade Continuity Agreement (TCA) and EU-UK reset deal are helping equip firms to seize opportunities to scale.
However, in an increasingly fraught geopolitical landscape, small businesses face obstacles they cannot overcome without help.
The uncertainty of the current global trade environment is a top-three operational concern for the majority of businesses across the UK, according to merchants we spoke to. That unpredictability only makes it harder for small businesses to navigate trade.
Those smaller businesses also don’t have the financial reserves, compliance teams, or the lobbying firepower to push back. They are the ones who are hit first and hardest by trade friction, red tape, and regulatory uncertainty.
While building a strong global trade environment requires multilateral cooperation, policymakers have within their power an ability to transform the UK’s SMBs position on the global stage.
Many SMBs are already turning to innovative and new technologies to help reduce complexity, but ultimately governments around the world must act to remove the barriers and red tape for small and scaling businesses. With the right steps, they can help every entrepreneur scale across borders.
So, where do forward-thinking policymakers start? With open trade policies that put SMBs first, not last. This calls for SMB-first trade agreements, the formation of a dedicated SMB trade council to represent small businesses in trade negotiations,
and clearer compliance guidance. Working with international partners, the UK government should also foster bilateral SMB export corridors, giving SMBs targeted market access in crucial regions like the US and EU as well as high-growth markets in Asia-Pacific.
Measurement and transparency will also be key. Creating and implementing a SMB trade impact review could be one lever to assess, and then fine tune, forging agreements based on how they benefit smaller businesses.
Opening trade in these ways must go hand-in-hand with protecting against unexpected shocks. SMBs – often those with the least room for fiscal manoeuvre – shouldn’t shoulder the burden of policy change.
A continued commitment to the UK’s de minimis threshold of £135, and ensuring reciprocal agreements with other markets is particularly important. De minimis makes cross-border selling accessible for small businesses. Without it, merchants and their customers face higher costs through taxation and complex customs processes.
Global trade must be an open door, not a locked gate. Old fashioned bureaucracy, compliance requirements and red tape remain significant obstacles. “Solo-preneurs” and small teams struggle with these administrative burdens, tripped up by opaque requirements or working overtime on paperwork that needs urgent simplification.
Digitisation could go a long way towards accelerating processing times, starting with e-signature recognition and paperless trading to ensure safety and legal protections. The government could also consider setting an ambition to build a full SMB trade portal to simplify documentation submission and house guidance on regulations.
Alongside this, commerce service providers that enable businesses to launch new international stores in a matter of clicks while automating currency conversion, duties and tax collection as well as shipping needs, can further streamline scaling-up for small but ambitious businesses.
Beyond digital transformation, expanding mutual recognition agreements would reduce the compliance burden further. Meanwhile, on a grander scale, strengthened bilateral trade strategies with major partners – the EU, the US, and Asia-Pacific in particular – would ensure SMBs can access international markets easily. The UK should take a proactive approach to engaging those key partners.
These are just some of the approaches the UK government should be considering. There are countless more levers at its disposal. If just half of the suggestions above were implemented, policymakers would radically improve the ability for UK SMBs to go global.
Despite the complexity of global trade, there are plenty of success stories that show how international trade can be a force multiplier for our economy.
Take Represent, founded in Horwich in north-west England by brothers George and Michael Heaton. The pair started out by selling t-shirts to friends and have since grown to become one of the most recognisable luxury fashion labels globally, through digital stores selling in multiple languages and currencies alongside, bricks-and-mortar shops in both Los Angeles and Manchester.
Another example is World of Books, founded in 2002 in the UK with a humble goal to make bookselling more sustainable. Today it is a certified B Corporation company that has sold over 100 million second-hand books to customers in 190 countries.
Pro-SMB, pro-entrepreneur policies in Westminster, Brussels and beyond will help make success stories like Represent and World of Books the rule, not the exception. Such changes are urgently needed when taking into consideration that during the final quarter of 2024 Britain recorded its highest number of company closures for two decades.
The status quo is failing too many entrepreneurs. It’s time for change. The next generation of British businesses is ready to trade with the world. Policymakers must act now: cut the red tape, open the gates, and make international trade a reality for every SMB.
The future of the UK economy will be written by its smallest businesses. Give them the tools, and they’ll do the rest.
