Australia’s connection with the United Kingdom goes back longer than any other market, and our exports are thriving there. Cameron Bayley investigates the appeal, and the challenges, of the UK market.
It’s not just Australia’s soap operas and pop stars making it big in the UK, plenty in other fields are flying the flag for ‘brand Australia’. In 2006, it was our fifth largest export market, behind Japan, China, the US, and Korea (by a whisker), and contributed around 6 percent to the nation’s export coffers.
With successes springing up in a wide range of industries, Alison McGuigan-Lewis, departing senior trade commissioner for Austrade in the UK, admits it’s sometimes hard to know where to focus Austrade’s attention. It’s a problem, but one they don’t mind dealing with. "There are great growth opportunities almost anywhere you look within the market. So it’s been a very positive story in the bilateral relationship, particularly commercially," McGuigan-Lewis says, citing current figures that show goods exports worth around $8 billion, and services at $4.5 billion.
Looking at services alone the UK market moves further up the rankings, coming in around third place. One of the reasons for this, says McGuigan-Lewis, is that goods such as IT software and programs are often bundled with associated services, rather than packaged off the shelf. According to statistics from the Department of Foreign Affairs and Trade (DFAT), some of Australia’s other successful service industries to the UK include those related to travel, finance, and business. Large Australian companies such as QBE, Macquarie Bank, and IAG are having enormous success in the finance and insurance market. Smaller sized exporters are finding the ICT and related software skills and services industries is the sector where they can kick some goals, says Jamie Banks, director of investment for UK Trade and Investment, the British government department which facilitates international trade between Australia and the UK (and the other way around). "That’s where the opportunities and the strengths lie."
In terms of goods exported, non-monetary gold is the country’s top export to the UK. Next is alcoholic beverages. Until recently the UK was Australia’s top export market for wine. Although the US has pipped us to first place in terms of value of exports, it remains our largest in terms of volume. Minerals and metals such as coal, lead, iron ore and copper are also big sellers, with manufactured goods such as aircraft and parts, medicinal and pharmaceutical products, computer parts, and motor vehicle parts also faring well, just outside the top 10.
So, what is it about the UK that makes it so appealing to Aussie exporters? "We’re clearly very fortunate in the fact that there’s common heritage, shared language, same legal systems," says Banks. He adds that family connections and the sheer number of Australians who take advantage of working holiday visas in the UK adds to a huge fondness for the country and a vast array of networking links that can help business. McGuigan-Lewis agrees: "Business is all about people. If you think of the number of visitors and émigrés out to Australia, there are lots of people-to-people connections." Austrade estimates there are 300,000 Australians living and working in the UK at any one time, and McGuigan-Lewis says many Australians hold senior positions in British businesses.
Peter Stone, managing director of NeoProducts, who export touchscreen self-service kiosks to the UK, says it was the familiarity and shared elements between the two countries, as well as the size of the market, that attracted the company to the UK for export. "You’re walking into a country that’s got similar values, similar cultures, same language, and all of a sudden you’ve got three times the size of the puddle you’re playing in."
Coming from a manufacturing and industrial design background, NeoProducts moved into specialising in touchscreen technology in the mid-90s, supplying gaming machines to TabCorp (then called VicTab). "We were the first in Australia doing touchscreens," Stone says. Another client was the Australian Government, who were big fans of the company’s job search terminals. When the opportunity came up to tender for the same role with the UK Government, NeoProducts put their hand up and won what has proven to be a AUD$60 million contract. "That really put us on the map internationally," says Stone. "Once we’d secured that job, everyone else around the world went ‘Whoa! Who is this little Australian company?’, and from there we’ve picked up a lot of other jobs."
McGuigan-Lewis says the prominence of the UK market means it’s a prime springboard for entry into other markets, as well as having wide appeal to other trading nations. It’s often the first English-speaking market for most Europeans, as well as being the first European market for many US and Asian companies. "So the world comes here. It’s one of those global benchmark markets," she explains. "If you can come in here and make it, you probably have a good reference site and good linkages for doing business in other markets."
Slow & Secure
However, because of this, the UK market is a very crowded space, and with many of Austrade’s clients taking up to two years to make their first sale, McGuigan-Lewis warns potential exporters to be patient. "You won’t find that sort of length of sale cycle in a lot of other markets. And because it’s unexpected, it can appear to be a lot harder than it is," she says. It’s not uncommon for exporters to spend their first year just working out who is the best contact in the market, and then negotiating a way into their diaries.
Moreover, McGuigan-Lewis explains that businesses in the UK tend to remain very loyal to their suppliers. "Even if that supplier isn’t performing as well as perhaps another supplier could–in comparison to say a place like the United States or Australia who will shift suppliers more readily." The pay-off, she adds, is that once a supplier relationship is established it can be very secure. "It’s a very relationship driven market, and they tend to look at things for medium to long term."
Stone says the success of NeoProducts came relatively quickly, perhaps because the niche it was targeting was new and the company had already been supplying the Australian Government. "Government clients want to buy a product that is reliable, from a reputable supplier, preferably from someone who’s got a good track record from the field they’re looking at," he says.
NeoProducts has now set up a plant in Birmingham, which handles production and supply into the market, as well as exporting to other markets such as Canada. "Having a base in Australia and a base in the UK works very well for us." As well as enabling the company to spread its wings into new markets, it has also afforded added credibility. "Once you’ve got a base in the UK, you’re seen as a UK company." And any Australian company that establishes a physical presence and registers as a UK company then becomes eligible for government export assistance, Banks explains.
For exporters this side of the globe, UK Trade and Investment is a worthwhile companion resource to Austrade, providing general advice on areas such as distributors and agents, where to go for legal help, information on forming a company in the UK and the tendering process in the European Union. Stone is a big fan of both, with NeoProducts using Austrade when needing to liaise with high-level British Government, and UK Trade and Investment for location advice when the business was looking to set up a UK base.
Over in the ma
rket, there are regional development agencies across the country and the British-based networking association Australian Business (www.australianbusiness.co.uk) provides opportunities and events not just for Australians in business in the UK, but for British companies or organisations with Australian staff, or who have an interest in investing in Australia. "It’s a strong and robust organisation with a great deal of influence," says McGuigan-Lewis.
While there are similarities between Australia and the UK, there are differences and you need to do your homework. "One key thing is, don’t think that an experience of one market necessarily applies to others," says Banks. "If you’ve been trading successfully with the US, it’s not the same as trading with the UK. There are distinct differences." Cultural differences do exist, and many exporters don’t spend enough time investigating these before launching into the market, says McGuigan-Lewis. "Brits aren’t Australians a long way away, with less vitamin D," she adds. "If we acknowledge there are differences, and we do need to operate differently when we get to the UK, as subtle as those differences can be sometimes, I think that would make entry into the market a lot easier."
Stone also advises exporters to carefully check all relevant rules and regulations for doing business in the UK market. NeoProducts had to make sure their products received CE (European Conformity) approval, and after a staff member was turned away at Immigration upon arrival in the UK, he warns any exporting business to make sure they stay on top of all visa considerations.
After the success of Sydney’s Olympics, the upcoming games in London in 2012 are already creating demand for some of Australia’s exporters. "There is still enormous respect for what happened with the Olympics in Sydney," says McGuigan-Lewis. "And of course those who supplied into both have been supplying into other games around the world." With these Olympics having a particular focus on urban regeneration the opportunities are much wider than with previous games, she explains. There’s also a lot of emphasis on developing community attitudes to health and fitness through sport, and also through dieting and food. "Australia is well respected in those areas, so they’re opportunities that we’re currently working on."
The creative industries are another area where Australia can flourish, she adds. Everything from performing arts to music, visual arts (especially indigenous and modern art) have the capacity to boom, with several projects and programs in place to assist. The recent Undergrowth initiative, a project launched by the Australia Council and DFAT, organised around 50 contemporary arts presentations during 2005-2006, and DFAT has also worked with Austrade to get Australian arts into the annual Collect festival held by the prestigious Victoria and Albert Museum.
Consumer products are also taking off, particular those showing a bit of Aussie flair. "We’ve seen a big growth in the capacity to take on Australian products. Everything from streetwear fashion and swimwear through to high-end couture," McGuigan-Lewis says. "Australia has a different view of the world and tends to be more experimental and take a lot more risks, and so it offers something a bit different into this market."
UK Trade and Investment are seeing a lot of advances in bioscience and technology, which Banks says is another avenue that is prospering. With many companies keeping their research and development based there, it helps to keep costs down and make them a viable option in the market.
It’s also Australia’s innovation that helps it stand out from others in the marketplace, and gives strength to the Australia brand, says McGuigan-Lewis. Banks feels our location on the globe means Australians have a particular mindset that helps us find new ways into the market. "Specialist niche products that have been developed here in Australia because you have to deal with the tyranny of distance—those niche opportunities actually can be applied in markets where our tyranny is congestion. There’s applicability there."
With so much success, it’s hard to pinpoint any market that isn’t doing well at the moment, although McGuigan-Lewis admits the wine industry has almost reached capacity. "Every distributor and every retailer has Australian wine on their list. It’s extremely mature," she explains. "Having said that, there are still new companies coming in, and there is still growth." With most Australian wine selling for less than 10 pounds per bottle, the new focus for the wine industry will be looking at infiltrating the higher end of the market. "We don’t dominate that part of the market. Yet. But with our boutique wineries we have the capacity to do so."
Banks and McGuigan-Lewis can only see good things ahead for bilateral relations between the two countries, although McGuigan-Lewis admits that with the UK currently going through a change of leadership and an election in the not-too-distant future, it’s hard to predict how that will affect the export situation, particularly as many companies like NeoProducts are successfully supplying the British Government. However, with the UK economy going through a boom, there’s still plenty of reasons to be very confident. "I think opportunities are there for people who want to take them," Banks adds.
It also helps that, perhaps in no small way due to Neighbours and Kylie, we seem to have sold ourselves as a nation very well to Old Blighty. "Britain probably views Australia more positively than Australia views itself," says McGuigan-Lewis. "And the Australia brand can probably be quite surprising for a lot of Australians, because it’s not often how Australians perceive themselves. But it is a very positive brand, it’s very well recognised and well received in Britain."