UK exporters lead call for euro referendum

Credit Management, Sep 2008

A new survey finds that more than half of UK exporters (55%) would vote in favour of the UK joining the single currency. Managing cash flow was also identified as vital for export success.

According to a major new survey of exporters sponsored by Coface, nearly two thirds of UK exporters (63%) have backed calls for a referendum on the UK joining the single currency. The survey was carried out by the Credit Management Research Centre, at Leeds University Business School. In the event of a referendum taking place, 55% of exporters would vote in favour of the euro, an increase of 12% compared with 2006.

The Coface Export Survey, a survey of UK exporters previously carried out in 2002 and 2006, also reveals that of those in favour of the euro, the biggest motivation is to see more certainty surrounding exchange rates (44%). Greater price transparency was an important factor for 28%, and 26% of those voting for the euro cited lower transactional costs as a key factor. Service firms are more likely to vote in favour of joining the euro (62%), compared to manufacturing firms (51%).

Commenting on the findings. Xavier Denecker, managing director of Coface, in the UK & Ireland said: "UK exporters are feeling the pinch from the global downturn with 61% saying they saw a decrease in export levels in 2007 and a further 58% expecting levels to decrease further in 2008. Against this backdrop, it is no surprise that exporters would like to see a level playing field when it comes to competing within Europe, and the impression seems to be that the single currency is one of the best ways of achieving that.

"The slowing world economy also appears to be having an effect on exporters' cash flow, with 58% of firms claiming that too many of their customers are taking longer to pay. Half say they spend too much time chasing payments and 74% are concerned about the possibility of suffering a bad debt."

Managing cash flow still remains an important issue for UK exporters with over 90% saying it is important for sustained commercial success. Given the overwhelming majority of UK exporters across all sectors and regions perceive cash flow as a very important factor for commercial success, having efficient cash flow protection is more critical than ever.

According to forecasts the current climate shows no sign of abating in the near future, consequently the issues raised in the survey will be given further emphasis and pressure on cash flow will increase.

A robust internal credit management system is one thing, but a well rounded strategy will also take advantage of externally available solutions including receivables management such as specialist export debt collection to tackle late payments; receivables financing, such as export invoice discounting, which advances up to 90% of the value of invoices immediately providing instant cash; export credit insurance to protect against overseas bad debts; and reliable international business information to identify prudent levels of credit to extend to customers abroad.

By partnering with a service provider possessing an appetite for - and expertise in - overseas trade, the issues raised in the survey need not have such a negative impact on UK exporters, enabling the vast opportunities, which still exist for those with adequate protection, to be exploited.

Other findings from the survey included:

* Similar to the findings of the 2002 and 2006 surveys, open account is the most likely method of payment to be offered by UK exporters

* Customer relationship management has become a key focus and strategic objective for UK exporters with 77% saying that trade credit extension is a 'customer relationship decision'.

Professor Nick Wilson, director of the Credit Management Research Centre, added: "Exporters are on the front line when it comes to sensing a change in the world economy and this year's survey points to a growing sense of pessimism for the year ahead. With harder times on the way, exporters are focusing on their cash flow and the avoidance of bad debt. Given the understandable popularity of trading on open account they will have to think carefully how they ensure they are paid on time."

The Coface Export Survey records UK exporters' experience of credit management and their views of the services designed to manage the risk of trading overseas. The results are analysed by geographic region, size of business, trade sector and UK region. An executive summary can be downloaded from the home page of www. cofaceuk.com.