On 5 June 2019, the then Secretary for State for International Trade (SoS), Dr Liam Fox, announced a new government initiative to help provide finance to UK small to medium sized businesses (SMEs) for exports to emerging markets. While SME exporters may welcome this show of financial support at a time of Brexit uncertainty, they could also be exposed to new and emerging bribery and corruption risks should they engage in increased or new business in emerging markets. This article considers the risks SME exporters may face, how SMEs can address these challenges and the role UK Government and large multinationals can play in supporting SME exporters in navigating these challenges.
Government support reinforces the integral role of SMEs in the UK economy
SMEs represent the vast majority of UK businesses and account for a majority of private sector employment in the UK. According to the Department of Business, Energy and Industrial Strategy, SMEs accounted for 99.9% of companies and 60% of private sector employment in the UK at the start of 2018.1 Indeed, the combined annual turnover of UK SMEs in 2018 was £2 trillion or 52% of all private sector turnover.
The UK Government estimates that 400,000 SMEs in the UK have the capability to export, but currently do not. As the SoS put it, "these announcements are potential gamechangers for our export industry, and will help us to tap a fresh vein of potential from within our economy."2 Throughout the course of 2018, 5% of non-exporting SMEs expressed a willingness to export goods from the UK – this could potentially amount to around 20,000 new SME exporters. This "gamechanger" financial support may incentivise a larger proportion of those SMEs to start exporting goods.
The UK Government's financing package will support SME exporters in their exports from the UK to fastgrowing emerging markets. It will give SME exporters greater access to bonds and working capital. The package itself includes three core elements:
- The Small Deal Initiative, under which UK Export Finance (UKEF) will guarantee the loans of potential overseas buyers of British goods to make UK bids more competitive;
- An extension of financial support to exporters and their supply chains; and
- The General Export Facility, which will allow UKEF to support exporters' overall working capital requirements rather than linking support to specific export contracts.
Post-Brexit opportunities present post-Brexit risks
"The impact of bribery [and] corruption is devastating for the economy and more so for SME[s]. Most SME[s] are very small and more exposed to these practices."3
Since the Brexit referendum, warning shots have been fired from different quarters cautioning that UK firms will face greater corruption risks postBrexit. In 2018, the National Crime Agency (NCA) stated that "UK-based businesses may look to increase the amount of trade they have with non-EU countries... [which] will increase the likelihood that [they] will come into contact with corrupt markets, particularly in the developing world, raising the risk they will be drawn into corrupt practices."4
Furthermore, a 2018 report published by Transparency International UK (TI-UK) concluded that six out of the UK's top ten trade partners are "not adequately punishing companies that pay bribes overseas" and recommended that the UK ensures anti-corruption and transparency provisions are built into all of the UK's post-Brexit trade deals.5 When the UK fell out of the top ten of Transparency International's Corruption Perceptions Index in May 2018 for the first time since the UK hosted its Anti-Corruption Summit in 2016, Robert Barrington, outgoing Executive Director of TI-UK, noted that this "will serve as an important warning to the UK against complacency in tackling corruption, not least with the prospect of post-Brexit pressure to lower standards."6
In short, the risks presented by trade with higher risk markets affect all UK exporters, large and small. However, where large multinationals are more likely to have extensive policies and procedures, training programmes and resources in place to manage and mitigate bribery and corruption risk, SMEs may not be so well-equipped to appropriately manage the risks posed by new and emerging markets.
1 Business Population estimates for the UK and regions 2018, published 11 October 2018, available at: https://assets. publishing.service.gov.uk/government/uploads/system/ uploads/attachment_data/file/746599/OFFICIAL_SENSITIVE_-_ BPE_2018_-_statistical_release_FINAL_FINAL.pdf
2 Liam Fox announces 'gamechanger' financial support package for UK SME exporters, UK Government Press Release, 5 June 2019, available at: https://www.gov.uk/government/news/ liam-fox-announces-gamechanger-financial-support-package-for-uk-sme-exporters
3 Combating bribery in the SME sector, Association of Chartered Certified Accountants, November 2013, available at: https://www.accaglobal.com/ab44
4 National Strategic Assessment of Serious and Organised Crime 2018, National Crime Agency, available at: https:// nationalcrimeagency.gov.uk/who-we-are/publications/173-national-strategic-assessment-of-serious-and-organised-crime-2018/file
5 UK's global partners failing to punish corporate bribery, Transparency International Press Release, 12 September 2018, available at: https://www.transparency.org.uk/press-releases/ uks-global-partners-failing-to-punish-corporate-bribery/
6 K drops out of top 10 in global anti-corruption rankings, the Financial Times, 29 January 2019, available at: https:// www.ft.com/content/8d1a2474-224e-11e9-b329-c7e6ceb5ffdf
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