Recent news reports claim that UK food exports have nosedived in early 2021 because of Brexit and weaker demand across Europe as restaurants, hotels and other hospitality outlets closed during the pandemic. In future, UK food exporters, including those in the South West, will have to shift their focus away from customers in the European Union and explore new markets. Here, Dr Hunter talks about the opportunities offered to SMEs and the regional food industry through trade and the establishment of freeports.
Capitalising on trade
In our globalised world, businesses need to explore new markets to grow and compete. The trade of goods and services across national borders is the defining process through which businesses can engage on a bigger stage. My research explores how innovation and growth can benefit from the relational and structural dimensions of social capital.
Social capital looks at the network of relationships among people who live and work in a particular society or marketplace. It explores how these relationships ensure the growth of entrepreneurial firms and enhanced supply chain relations. There has been considerable interest in social capital recently, as we investigate disparities in the performance of organisations, networks of operators, and societies.
Relational social capital covers the highly developed relationships of cooperation and collaboration between firms, institutions and people. These are based on shared norms and trust. Structural social capital explores gaps or holes, between different clusters or groups that can hinder the exchange of information, resources and knowledge, harming competitiveness. Bridging these structural holes through interactions with new and unfamiliar contacts and networks however can enhance competitive advantage. It also encourages social innovation.
I have supported businesses in establishing strong links with other organisations to grow or expand their market reach. Beyond the direct trade benefits, these relationships can build stronger, more beneficial and sustainable societies. In the food sector particularly, diversity can foster new markets and new processes, furthering internationalisation of UK food processors in countries and market segments that would otherwise be very difficult to penetrate. This includes building strong partnerships for aid-funded business such as supplying food to UN organisations.
Supply Chain Trade and Freeports
The government recently announced the launch of freeports in the UK. Freeports are a trade concept rather than a ‘port’ as the name may imply.
Usually located around an airport or seaport, or a defined transport corridor, goods and services entering a freeport are exempt from tax charges that would usually be paid to the government. In trade terms, relationship building based on norms and trust is a process taking place in international supply chains. Fragmented global production systems operate in line with norms and standards that support the seamless movement of goods and services across borders. Supply chains are the foundation of competition in the international trading system.
The key for SMEs in respect of freeports is to develop competitiveness in clusters of innovation with global reach, to share resources and develop resilience. For sectors such as food production where supply systems are fragmented across small players, SMEs are more exposed to competition. The Office for National Statistics recently confirmed that the food sector has made the largest contribution to the UK economy, approximately 10% over the past decade. However, the scope for domestic growth is limited to quality improvement as consumers’ intake capacity has flattened. This implies that growth will come from internationalisation, especially beyond the EU. Opportunities exist particularly around port areas with food flows, such as Tilbury, to expand and strengthen the supply chain trade of the UK food sector.
Support to SMEs
One consideration in creating a freeport is its potential to stimulate economic opportunities, particularly in regions of deprivation or unfulfilled potential.
This offers some regions a platform to develop and strengthen their position nationally and globally. The freeport enhances exports using trade infrastructure and technology. Exporters can take advantage of existing trade procedures without employees needing to travel internationally or to set up a trading subsidiary or overseas entity.
Freeports offer particular benefits to SMEs. They can simplify planning, reduce customs costs and potentially offer tax breaks to encourage private investment and job creation in locations where this might otherwise be extremely challenging. Trading internationally often increases business costs and risks. Navigating the necessary bureaucracy and managing documentation can be prohibitively expensive and time consuming for small businesses. Arranging the logistics can be burdensome. Using the infrastructure of a freeport can alleviate some of these business headaches. For SMEs in the food sector, sharing a supply chain infrastructure handling cold, frozen, chilled and dry foodstuffs will bring economies of scale and strengthen their competitiveness in the global supply chain.
Businesses Innovation and process improvement
SMEs are very innovative. Having limited resources at their disposal, they have to develop creative approaches and solutions.
SME business leaders, with limited numbers of employees to rely on, are often involved in most decision-making processes. Their focus on the day-to-day management and operations leaves little time to investigate new and enter overseas markets and business improvement. We have experience and expertise at Plymouth Business School that can benefit small businesses in addressing barriers to market entry. We can also support them in integrating new trade processes with their existing operations and we have developed toolkits aimed at SMEs.
My background in finance and management consultancy helps when I advise businesses who rely on numerous organisations to deliver products and services. This includes enhancing profitability by analysing margins and identifying problem areas or developing frameworks to improve business processes. This can enable effective coordination between various teams and departments to share real-time information and ensure processes are effective and efficient. This can improve long-term profitability and competitiveness, offering better job security for employees.
Preparing for Brexit was particularly challenging for SMEs. My expertise has helped some SMEs address recurrent trade barriers affecting transport and warehousing operations, resulting in a centralised and coordinated system of supply. This provides more predictability in the supply chain and limits the risk of disruption.
Building on regional expertise
The South West produces high quality food that could be enjoyed by consumers and diners across the globe, including many top destinations outside of the EU. The contribution of exports to value added for the region remains low; we need to address this. The region’s ‘natural capital’, our stock of natural assets, has huge potential. Together this gives us a strong foundation on which to improve prosperity across the South West through agri-trade and agri-tech, ensuring this natural advantage runs through everything we do.