DCP228 and Business Electricity
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Exporting goods and services offers new markets and greater scope to grow, and protects against downturns in your domestic market. Find out how with our guide.
Small businesses that export are usually more competitive and innovative and stand a better chance of growing and surviving.
Government research suggests that it is around 11% more likely that a company will survive if it does business overseas. Companies that have worked with the export-advice organisation UK Trade & Investment say they make on average £100,000 worth of additional sales within 18 months of starting to sell to foreign customers.
Phil Couchman, CEO of freight company DHL Express UK & Ireland, says: “By capitalising on the huge demand for British products within and beyond Europe and with the right support, UK businesses can grow exponentially by expanding their customer base overseas.”
Selling internationally can provide great opportunities for your firm, but there are a number of issues to consider before you start:
If your business is providing services such as accountancy or law, there may be considerable regulatory differences in other parts of the world. But British fashion, ceramics and foodstuffs, for example, have strong international reputations and are likely to be in great demand. UK-based environmental and transport consultancies have also had a lot of success transferring their services to international markets.
Changes in the value of the pound sterling can affect exporters, as we saw after the 2015 general election. Before you start exporting, you need to decide what your pricing strategy will be to cope with any changes in the value of sterling – for example, as the pound gets stronger you may need to raise your prices in foreign currency terms to maintain profit levels.
Most exporters sell at least some of their products direct to consumers or other businesses – the internet makes this very straightforward, although there are considerations – while others use local agents or distributors. Think also about how you plan to market and ship your products and how much this will cost.
Researching and visiting new markets, setting up sales channels and dealing with the red tape associated with overseas selling can all take time and money. Does your firm have enough spare cash to handle this? Do you or other senior staff have enough spare time?
Research on overseas markets is a first crucial step. Will your product or service be in demand in your chosen country and will you need to make any changes to pricing?
You also need to assess what regulations you may be faced with when shipping your products to that country.
Selling to customers in the EU may make sense as a first step because there are far fewer export regulations to deal with (see below). The EU’s proximity can also mean lower shipping costs.
Some firms prefer to deal in the first instance with other English-speaking countries such as the US or Australia: this means that marketing material doesn’t need to be translated and can help reduce the problems associated with dealing with different cultures.
Help is available at UK Trade & Investment: the organisation’s consultants can offer advice on operating in any overseas markets. It also publishes country-by-country guides on the challenges exporters may face, as well as legal, tax and customs issues. As a first stage, below are some factors you should consider:
The customs hurdles you will face as an exporter are different depending on whether you are selling within the EU or not.
Within the EU, you will not have to pay duty and there are no customs checks on the goods you send abroad. However you will have to record these goods on your VAT return. If your customer is VAT registered, you won’t have to pay VAT on the goods; if they are not registered for VAT, you generally will have to foot this bill.
For sales outside the EU, you will need to submit an export declaration. This can be done with an Economic Operator Registration and Identification (EORI) number, and then registering for the Customs Handling of Import and Export Freight system (CHIEF). Once you’ve done this, you can submit your declaration through the National Export System, which is part of CHIEF.
Some goods will also need an export licence, such as certain antiques and some agricultural goods
Most goods sent outside the EU can be zero-rated for VAT, but you are likely to face duty charges from the country that receives your goods.
Whether you are exporting within or outside the EU, you need to get a commodity code for the products you are exporting. This is available from the government’s Trade Tariff.
If you use an agent or freight forwarder to handle your shipping requirements they will also be able to deal with this red tape, but at a cost.
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