Britain’s largest services firms are launching an export push in the next 12 months amid caution about the UK economy. Despite the current state of play both politically and economically half (48 per cent) of businesses are planning to take their services to new international markets.
Services bosses say the EU (44 per cent) continues to offer the most potential, in spite of current uncertainty, followed by the Far East (32 per cent) and China (31 per cent). Nine in 10 (86 per cent) of those pushing overseas are doing so via mergers or acquisitions, while two in five (38 per cent) expect to remain UK-focused.
The figures come from the Business in Britain report from Lloyds Bank Commercial Banking. The report draws insights from large services businesses, from legal and accountancy firms to recruitment, IT and software services, business processing outsourcing and support services. Over two-thirds have turnover of £500 million or more. Though firms face inherent challenges in exporting services – such as differing legislation and regulation in international markets – the UK enjoyed an £83.4 billion trade surplus with the rest of the world in 2017, the last year for which data is available.
Despite the upbeat outlook on their international prospects, services firms are cautious about the UK economy. Only a quarter (25 per cent) expect it to grow in the next 12 months and a third (36 per cent) predict it will contract. Most services firms are confident about their own fortunes, with 74 per cent forecasting a rise in their turnover in the next five years. Half (48 per cent) say a no-deal Brexit is a risk to growth.
“Much of the UK’s services sector is world class and recognised as such in international markets, something underlined by companies’ optimism about their trade plans for the next year,” said Mark Burton, managing director of services and telecommunications, media & technology at Lloyds Bank Commercial Banking. “Many are seeing potential in faraway parts of the world such as Asia, but firms here remain focused on the EU as their key export market in the immediate future.
“Plans to expand overseas reflect the ongoing international demand for UK expertise and a desire to access the markets that will shape the future global economy,” he added. “This could be testament to the fact that a minority expect the UK economy to contract in the next 12 months and services companies are bullish about their growth prospects.”
The Business in Britain report, which surveyed businesses with turnover of £100 million and above, also reveals that UK services firms are being proactive in investing in technology to spur their growth.
More than eight in 10 (84 per cent) are either automating work or planning to do so, while two-thirds (67 per cent) are developing or adopting disruptive tech – but 43 per cent admit it is likely to lead to some job losses, though these could be process-based roles as the focus switches to higher-value jobs.
Over a five-year time horizon more than half (52 per cent) say they will create jobs. This tallies with a report released last month in which MPs on the Business, Energy and Industrial Strategy Committee predicted that investment in automation would likely result in more jobs and improved pay.
“The tech revolution is reshaping every sector as it can help to drive efficiency and improve performance to meet customers’ ever-evolving needs and expectations,” concluded Mark. “In the services sector, this also presents competitive advantages – at both home and abroad – and, through time, job creation including better-paid, higher-value roles.”