- UK businesses trading internationally are performing better than those limited to domestic trade, according to the latest Santander Trade Barometer
- Rising costs and the ability to attract skilled staff have the greatest influence of any factor over future business growth, according to 73% of businesses surveyed
- ESG pressure from customers forces businesses to consider changes
- The EU remains in place as number one region for international growth opportunities, the US tops the country list as popularity of Australia continues and India dips below China among Asian markets
UK businesses that trade internationally continue to outperform those limited to domestic trade, according to the latest Santander Trade Barometer published today1. Despite economic headwinds, 51% of companies that trade internationally report improved performance over the past year compared to just 44% of those which do business solely in the UK.
But business confidence in growth over the coming three years has fallen slightly to reach 72% - down from 76% recorded in Spring 2023. The acute cost pressures around labour and materials are easing off for businesses, but they are wary of rising costs and the ability to attract skilled staff (cited by 73% of companies), which they believe will have the greatest influence on whether they will grow or stall over the next three years.
John Carroll, Head of International & Transactional Banking, Santander UK said: “The Santander Trade Barometer continues to showcase international trade as the most significant growth driver and the fastest route to recovery for businesses that have faced relentless challenges over the past few years and we are delighted to be leading the way, having supported over a thousand businesses into a new market overseas in 2023 alone.”
Labour market pressures and recruitment issues
Rising costs and the ability to attract skilled staff have the greatest influence of any factors over future business growth – 73% of all businesses reported these two factors as net important. Followed by the UK’s economic prospects (69% net important). The autumn Trade Barometer reveals businesses have faced a host of staffing issues over the past six months, including higher starting salaries (57%), more staff vacancies than usual (54%) but recruitment and training feature top of businesses’ investment plans for the next year, with 43% planning to hire new staff and 40% putting funds into staff training.
When operating in international markets, skills gaps exist for 22% of businesses that see accessing the right skills as one of the challenges they face. Of the businesses that see skills shortages as a problem, a third consider that they lack expertise in sustainability. This includes help to understand their business’s sustainability performance, and skilled people to implement and evaluate their ESG strategies. The biggest gaps were in dealing with red tape (36%), sales and marketing (34%), sustainability (33%), cross border trade (27%) and raising export finance (26%).
Supply chain diversification
Currently, 40% of all businesses report their supply chain is reliant on China but according to the Barometer, UK businesses are increasingly thinking about moving their supply chains closer to home and away from China. 64% of UK SMEs are considering bringing supply chains back to the UK, and 55% to the EU. Of all businesses that reported plans to transform or diversify their supply chain in next year, 77% are doing so to drive efficiency and save costs.
International market developments
For international growth opportunities, the EU has remained in its place as the leading region for growth opportunities (cited by 53%), up from 46% in spring 2023. This is despite a host of persistent obstacles to trade caused by bureaucracy (31%) and post regulatory challenges (30%).
On a country basis, the US continues to lead for growth opportunities (cited by 37%), having been top country since autumn 2021. The nation is particularly strong in providing opportunities for trade with food & drinks companies (87%), manufacturing (82%), wholesale & retail (71%) and telecommunications, media and technology (TMT) companies (69%). TMT also topped the list of industries in terms of its confidence in growth over the next three years (89%).
India (cited by 12%, down from 16% in Spring 2023) has dropped below China (13%, up from 11% in spring 2023) to become the top market among Asian countries for international growth opportunities. After the US, Europe’s top countries are Germany (28%) in second place, France 19% in fourth and Spain (13%) in seventh.
John Carroll, Head of International & Transactional Banking, Santander UK added: “We know the world of international trade can be complex. By using our in-depth Trade Barometer insights and our Santander Navigator, we can make that journey simple, helping UK businesses to feel more confident in exploring global markets.”
Minister for Exports Lord Offord said: “It’s fantastic to see businesses that trade internationally enjoy improved performance over the past year. When more firms export great British products and services around the world, it boosts jobs, wages and the economy.
"As we mark International Trade Week 2023, we want to get even more businesses exporting so we can hit our ambitious target of £1 trillion of exports a year by 2030."
Building Resilience for UK companies
Businesses are looking to international trade as the single biggest driver of resilience. Almost two thirds (62%) say overseas activity reduces reliance on the UK economy and the same (63%) say it has greater potential than the UK to build resilience. More than a third (38%) perceive international growth as the way out of current economic challenges.
To support UK companies looking to expand overseas, Santander UK last year launched Santander Navigator, a digital subscription platform. The platform provides expertise and knowledge collated by Santander Corporate & Commercial Banking’s international team3, including the research from the Trade Barometer, to help UK businesses overcome international trade-related obstacles, understand the attributes of doing business in a new market, and connect them with growth opportunities overseas. Businesses can subscribe to access a personalised service, based on their individual needs, and to help achieve their international growth ambitions. Find out more about Santander Navigator here.
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Santander UK is a financial services provider in the UK that offers a wide range of personal and commercial financial products and services. At 30 June 2023, the bank had around 19,400 employees and serves around 14 million active customers, 7 million digital customers via a nationwide 445 branch network, telephone, mobile and online banking. Santander UK is subject to the full supervision of the FCA and the PRA in the UK. Santander UK plc customers’ eligible deposits are protected by the FSCS in the UK.
Banco Santander (SAN SM, STD US, BNC LN) is a leading commercial bank, founded in 1857 and headquartered in Spain. It has a meaningful presence in 10 core markets in the Europe, North America and South America regions, and is one of the largest banks in the world by market capitalization. Santander aims to be the best open financial services platform providing services to individuals, SMEs, corporates, financial institutions and governments. The bank’s purpose is to help people and businesses prosper in a simple, personal and fair way. Santander is building a more responsible bank and has made a number of commitments to support this objective, including raising €220 billion in green financing between 2019 and 2030. In the first half of 2023, Banco Santander had €1.25 trillion in total funds, 164 million customers, 9,000 branches and 212,000 employees.