Categories
Banks, Lenders & Investors Business Development & Marketing Cash Flow & Forecasting Finance General Rescue, Restructuring & Recovery Turnaround

UK Steel – how can business operate in a global market?

word cloud on global tradeLast week’s decision by Tata to sell off or close its UK steel operations graphically illustrates the challenges for UK businesses in competing in a global market.
Among the explanations for the decision have been a sluggish world economy, falling commodity prices, and a glut in steel production.
Specifically, there is the huge imbalance created by China’s subsidy of its own steel industry enabling it to corner more than 50% of the world’s steel market and to sell at prices with which other producers cannot hope to compete.
Arguably UK steel’s problems have been compounded by high energy costs and by Government unwillingness to subsidise the industry, or to introduce measures to encourage UK industries to “buy local” or to impose tariffs on imported steel. The other factor is high business rates which for Port Talbot are set by the labour leadership in Wales so this is not a party political issue.
Ironically, skill shortages and the mobility of labour are perhaps the only issues that the industry does not have to face. Instead its skilled workforce may be facing extinction.
While there are signs of potentially interested buyers for parts of the industry the whole saga does illustrate some of the problems businesses face in trying to compete in an increasingly global market.
These are well rehearsed. They include disparate labour and energy costs, high business rates and clean energy tariffs, different conventions in different countries about how business is regulated and conducted, and the volatile behaviour of investors, commodity markets and global demand; all difficult to harmonise and all particularly affecting industries with long lead times between order and fulfilment.
There is no such thing as a level playing field despite the existence of the World Trade Organisation (WTO), which attempts to investigate and regulate complaints of unfair trading via the General Agreement on Trades and Tariffs (GATT).
Resolving disputes is a lengthy process as exemplified by  the time it took for the WTO resolve a complaint raised by the USA, supported by the EU and Japan, in March 2012 about China’s rationing of supplies of Rare Earth Metals by imposing export tariffs and physical export limits. China has the majority of the world’s deposits of Rare Earths that are essential to the manufacture of electronic goods from mobile phones to car batteries. It took until March 2015 before the situation was resolved and China agreed to remove its restrictions.
The process of negotiating inter-state or inter-continental free trade deals is equally lengthy.
What business can wait that long for an inequitable situation to be resolved?

Innovation, agility and collaboration

However, there are ways in which a business can be more innovative and agile. In an article in the Daily Telegraph on April 3, 2016, Chris McDonald argues that steel production does not need to disappear from the UK manufacturing landscape: “Two-thirds of the steels in use today were not even invented 15 years ago……….” he says. “Automotive, aerospace, defence, nuclear and rail constantly require the innovation and manufacture of new steels, which form the core of improving productivity.”
He argues that if domestic producers and end users partner with research and production moves to smaller, more specialised mini operations using electric arc furnaces  the result will be a more responsive, innovative and flexible UK steel industry.
Perhaps there are lessons here for other businesses and industries. Off shoring on cost grounds may not be the only competitive answer to survival if it slows down development and production times.

Categories
Banks, Lenders & Investors Business Development & Marketing Finance General Turnaround

Export opportunities for SMEs? Go take a look

A global economy does not necessarily mean a homogeneous economy.
Many SMEs struggling to grow their business in the currently unstable UK market doubt whether there will be demand overseas for the goods or services they offer locally, but they could be wrong.
Former property surveyor Chris Ives, writing in the Guardian small business column, is a good example. He set up a micro brewery producing unusual beers after losing his job in the 2008 crash.
Daunted at first by the risk involved in venturing into export, by the perceived expense and by a lack of confidence he took advantage of the facilities offered by UKTI (UK Trade and Investment) and an opportunity to join trade missions run by a well-known bank.
Now he is exporting to the US, Canada and Scandinavia.
He says the keys to successful exporting for a small business depend on visiting your potential market, doing the research and meeting potential partners.
Do you know other small businesses that have made a success of exporting?

Categories
Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

Flavour of the month – MINT

 

It started with the BRICs, then came the PIGS and now it’s the MINTs.

What do they all have in common besides being acronyms?  They’re all groups of countries that have at various times been grouped together as either economies that are tipped to grow, and therefore offer good potential for UK firms wanting to expand and export their goods and services, – or possibly not, in the case of the PIGS (Portugal, Ireland, Greece and Spain) highlighted as problem economies at the height of the global financial crisis.

It seems the BRICs (Brazil, Russia, India and China) are old news.  The potential new kids on the block are the MINTs (Mexico, Indonesia, Nigeria and Turkey).

Although they are widely disparate both geographically and in terms of infrastructure they are being seen as emerging economies with growing populations of young people.

We’ve said before that SMEs in the UK need to become more innovative when researching markets for their products and services and to not discount opportunities for growth abroad.

We’re not pretending it will be easy so you need to do your homework.  If you can, it’s worth actually visiting the country to get a feel for how things work and what opportunities might exist.

The Government’s UKTI (UK Trade and Investment) is a good place to start.  It offers support and experts to help you and regularly organises business delegations to countries around the world.

Fancy a MINT anyone?

Categories
Business Development & Marketing Cash Flow & Forecasting General Rescue, Restructuring & Recovery Turnaround

Two steps forward and one step back is the new normal

“It seems that every time an upward trend in sales volumes seems to be emerge it’s quickly snuffed out. While disappointing, trades data are a reminder that despite some positive upward indicators, the ongoing squeeze on incomes means there’s a limit to how quickly growth can pick up”.
This reported comment from Simon Wells, HSBC’s chief UK economist, in the London E. Standard may seem to be a statement of the obvious but it bears repeating in a world where every tiny short term uptick is seized on as evidence of recovery from the global economic crisis.
Irrespective of who is to blame we should remember that high price inflation and minimal salary inflation plus the current uncertainty about employment have meant a real squeeze on incomes. Both businesses and consumers remain focused on paying down debt.
While confidence might rise this can only translate into a rise in credit and in people’s ability to service debts.
We are also in the midst of a global economic rebalancing that is shifting power and influence away from the so-called developed world to other economic centres and this is likely to take a long time to stabilise.
Every business, and not only the retail sector, that is looking at restructuring for growth needs to bear all this in mind whether it is considering developing exports or its home market.  It will be about focus on the longer term, about real innovation, about providing value for money and about close attention to customer service to achieve success and growth.

Categories
Banks, Lenders & Investors General Turnaround

Norman Tebbitt said “Get on Your Bikes”, we Say “Get on a Plane”

Optimism has been in short supply as 2011 comes to its end and businesses will need to be even more innovative and proactive if they are to survive and grow in the face of the gloomy economic predictions of stagnation for the next few years.
The ONS says industrial production fell by 0.7% in October in contrast to a rise of 1.7% in October 2010. The OBS downgraded its growth forecast for this year from 1.7 per cent to 0.9 per cent and from 2.5 per cent to 0.7 per cent for 2012 and the OECD predicted that the eurozone economy will shrink by 1% in the fourth quarter of 2011 and then by 0.4% in the first quarter of next year.
By contrast to the above, HMRC’s latest figures for UK exports show non-EU exports grew in September by £0.4 billion (3.4%) more than August while exports for the EU increased by £1.6 billion (13.4%).  September’s non EU exports were worth £11.3 billion and the month’s exports to the eurozone were worth £13.6 billion.
Although both figures show a slight improvement on August 50% of UK exports go to the eurozone.  Given the ongoing turmoil in the eurozone it would be foolish for UK business to continue to rely so heavily on Europe being able to continue taking such a large share of UK exports, let alone support any growth.
Currently the UK imports more than it exports and the trade gap with areas both inside and outside the eurozone is increasing both monthly and year on year.
Investing in UK businesses has become too much like bank lending. Instead we need a culture that rewards risk-taking and celebrates those who profit from risking their own capital. Most people in the UK want to invest in land and property as a long-term safe haven for their capital. Neither the culture, nor the tax incentives encourage us to invest in exciting business ventures. We are not encouraged to be adventurous for the future of UK plc. Ideally set up some meetings before travelling but you really do need to get on a plane if you want to find new customers.
UK businesses in both manufacturing and service sectors have become too reliant on the domestic market and need to look overseas, well beyond Europe. We should revive some of the spirit of our Victorian forefathers.
In an echo of former MP Norman Tebbitt’s famous advice to the unemployed to “get on your bikes” K2 says businesses should “get on a plane”.
We need pioneering Business Heroes prepared to explore foreign lands and open up new markets to sell our goods and services to countries that have potential for real economic growth. Are we still hoping that business will come to us? The world has changed and we must go out and start finding it.
Regime change in North Africa and the Middle East offers some terrific opportunities, while elsewhere, such as the BRIC countries, people are thirsting for the standard of living that we take for granted.
To those readers who are saying “yes, but…” to this argument, the reply is: “our forefathers conquered the world.  They took risks and it’s time we started taking some ourselves. We need to rediscover our spirit of adventure.”