https://innovateuk.blog.gov.uk/2016/07/06/march-of-the-makers-exports-and-innovation/

March of the makers – exports and innovation

‘March of the makers’ was the call to arms by the Chancellor George Osborne in 2011- a rallying cry to get the nation to make more and sell it overseas – for Made in Britain to become as prevalent and strong a brand as ‘Made in Germany’.

Made in Britain stamp

 

His motivation is clear. Although the UK has a positive trade balance in services – it sells more overseas than it buys (£89.14 billion in 2014 to be precise). This is offset by a massive trade imbalance in goods – we imported £123 billion more than we exports.

The economics of trade imbalances are complex, and we all know the one about economics being the only field in which two people can receive a Nobel Prize for saying exactly the opposite thing, but I think we can all agree that we would prefer to be in surplus than in deficit – enter the Chancellor George Osborne.

Born global

Now, exports are influenced by a myriad of factors:

  • exchange rates
  • rules and regulations
  • finance
  • infrastructure
  • transport costs
  • language barriers, etc.

Exporting by plane

But what I want to focus on here, is the connection between exporting and innovation.

Intuitively, it is easy to understand, that having something that is better, cheaper, faster, lighter, etc. than the competition has, or something the competition doesn’t have at all, something that we call ‘disruptive’, would allow a business to gain an advantage over other businesses already in the market, or those seeking entry into that market.

In some cases, businesses that start up on the basis of a product innovation are ‘born global’ – they ‘skip’ the domestic market and start selling overseas from the word ‘go’.

So, increasing the rate of innovation overall in a nation, logically, would give that nation an advantage over its competitors (everything else being equal).

As mentioned above, exports are driven by many factors, but, by and large, there is a positive correlation between innovation and exports.

The picture is more subtle and advantageous than this though.

The ‘away effect’ – learning through exporting

Not only is there a hard economic case for exporting - allowing a business to:

  • grow its sales
  • make more out of its existing resources (economies of scale)
  • increase its resilience in down-turns
  • improve its productivity (see here for Kevin Baughan’s blog on productivity)
  • these businesses encounter other competitors, other products and customers, other market conditions.

These different ways of doing things and new pressures, force businesses to adapt, to learn, all of which can be taken back home to improve its own operations and success in the domestic market.

This is what is called ‘the away effect’ – football teams that do well enough in their domestic leagues to go on to take part in say, the Champions League, are pushed on even higher by having to adapt and learn from overseas teams and conditions. Let’s hope that this is the case for Leicester City this coming season!

Away effect
'Away effect'

The logical extension of ‘the away effect’ is, that in some cases, firms get new ideas that can be exploited, the economies of scale allow them to increase their spend of R&D, which leads to the firm to become even more innovative.

Innovate UK partnering with UK Trade & Investment

All of the above provides the reasons for Innovate UK’s close partnership with UK Trade & Investment, the government body tasked with promoting the UK overseas as a business partner for trade and investment and helping UK business onto the export ladder or existing exporters to do more.

UK Trade & Investment have teams on the ground in England and works closely with those in Scotland, Wales and Northern Ireland to help UK businesses with exports and investment.

It also has teams in over 100 overseas embassies, High Commissions (for Commonwealth nations) and consulates.

The partnership with UKTI has always been strong, but was strengthened in 2013 through a part-time secondment into UKTI by Innovate UK. What do the two organisations do together?

INNOVATE 2015
INNOVATE 2015
  • They hold the UK’s prime technology and innovation showcase event together in November of each year. The event this year, Innovate 2016, will be held on 2 + 3 November 2016 in Manchester.
  • Innovate UK asks the businesses it supports and that are in a position to start exporting or need help exporting, whether they would like to be put in touch with UKTI. Those that say yes are ‘handed over’ to the UKTI export teams
  • Similarly, we hold investment briefings and events together, where Innovate UK supported businesses looking for funding are put in the same room with UK and overseas investors.
  • We make sure that when Innovate UK ventures abroad to help businesses connect with overseas investors, or find partners, that this is based on intelligence from UKTI overseas and sector specialists. Over the last 8-9 years we have held so-called Entrepreneur Missions with UKTI’s help, where we bring young, small and promising UK businesses to overseas markets like the US, India, China and Brazil, to help them find partners, investment and sales.

March of the makers!

So, in summary – innovation, productivity, export success, they all matter and they are all inter-related.

Being more innovative gives firms more chance to have export success, it drives productivity, which in turn make the firms more competitive, making them more competitive, etc., etc.

Knocked out by debt

We can start to turn a corner and pass on wealth rather than debt to our children and our children’s children by:

  • raising our game as a nation
  • getting more businesses to look at innovation as a driver for their productivity and success
  • opening their eyes to global markets and helping them access them for trade and investment,

The question to you is - what more could you be doing, but also – what more should we be doing?

Follow me on Twitter: @PeterDirken

You can follow Innovate UK on: