The UK economy faces a potential £40bn hit as a result of costly and complicated shipping processes, a new study has found.
Parcel delivery giant Evri is calling on the government to help break down barriers for UK businesses to trade internationally, with new research laying bare the challenges facing small businesses today.
The research, which forms part of Evri’s inaugural report into UK small and medium-sized enterprises (SMEs), has found that nearly two in five (38%) have reduced or stopped shipping internationally, with rising costs cited as a key contributing factor.
Furthermore, 15% said they lacked confidence in understanding the legalities around international shipping, which comes following changes to exporting processes over the last five years, as a result of major national and global events, such as Brexit and the pandemic.
The report, consisting of insights from over 500 UK SMEs on factors affecting the industry, found that over half (55%) believe that easier exporting to the EU would help the growth of their businesses, pointing to the underlying opportunities yet to be unlocked.
And with the latest full year figures from HM Revenue and Customs revealing SMEs accounted for around a quarter (25%)i of the UK’s total export value, Evri is encouraging the government to go further in its support of small business exports to the EU.
While measures such as the EU VAT e-commerce package introduced in July 2021 were a positive development for simplifying some EU shipping processes, particularly for SMEs, the costs associated with these changes are still proving to be a barrier, the report said.
In championing small businesses, Evri plans to share its findings with the Department for Business and Trade (DBT), as it calls on the UK government to leverage its improved relationship with the EU and enable parcel delivery companies to support SMEs in exporting by collecting VAT to supply directly to EU member states.
The parcel delivery company will be writing to the trade minister to outline how a more streamlined process, which would enable businesses to tap into an existing pool of parcel carriers already operating within these global markets, could empower SMEs to revisit international trading, ultimately helping plug the potential £40bn black hole created by previously complex arrangements.
Martijn de Lange, Evri chief executive, said: “Businesses of all sizes continue to navigate through a turbulent economic landscape, and so it’s vital that we look to streamline processes that may be presenting blockers for them to expand into other markets.
“Over the last five years, changes to shipping have brought additional complexities to exporting processes, and our research reveals in particular the drawbacks this has had for UK SMEs.
“And that’s why we are now urging the UK government to take action to facilitate SMEs’ international growth. Changes to EU VAT regulations that deem parcel delivery companies as suppliers will help offload some of the responsibilities currently borne by SMEs, empowering operators such as Evri to truly support our customers on their growth journey.”
Marco Forgione, Chartered Institute of Export and International Trade director general, added: “Evri’s findings that two in five SMEs are reducing or stopping exporting are concerning, but not surprising.
“Feedback that the Chartered Institute of Export & International Trade hears from members consistently reflects that SMEs are struggling with issues such as access to finance, navigating uncertainty in policymaking and shifting regulatory goalposts.
“Specifically, research we conducted with the Social Market Foundation last year showed that SMEs considering exporting to emerging markets were being dissuaded by factors such as regulatory complexity and risks associated with the transportation of products to customers in emerging markets, as well as payment reliability.
“Having recently led the work of the E-Commerce Trade Commission, we agree with Evri’s conclusion that international marketplaces provide a significant growth opportunity for SMEs, as evidenced by the Commission’s own findings.”
Henry Cartwright, Evri SME director, commented: “At Evri, we work with over 2,000 SMEs, and we witness first-hand the contribution they make to industry. Enabling businesses to explore routes into international markets presents a huge growth opportunity, often instrumental to their overall expansion.
“And with our own data highlighting a 62% increase in parcel volumes from our SME clients last year, we must not underestimate the financial impact that complicated exporting processes has on not only the individual businesses but also the wider UK economy.”
Evri’s findings come as the Yorkshire-based parcel firm releases its inaugural report into UK small businesses, which also found that two-fifths (40%) of SMEs cited ‘increasing cost of goods and services’ as the number one significant financial challenge they currently face, closely followed by rising energy costs (37%).
With over half (52%) of SMEs highlighting inflation/cost increases as their biggest concern for the future of their business, followed by the prospect of a recession (44%), it’s clear from the research that businesses continue to feel a sense of economic uncertainty.
