Britain back in the race as exporter

Overseas sales are growing fast and it's not all due to a weaker pound, writes David Bowen

THE BRITISH made a lot of money last year, selling money. Not on the currency markets but in neat packets of unused notes. "It was a bumper year for us," says a spokeswoman for De La Rue, Britain's biggest banknote printer.

Thanks to the sale of bolivars to Venezuela, riyals to Saudi Arabia, ringgits to Malaysia and tenges to Kazakhstan, the value of "unused stamps of current issue, banknotes, bonds etc", to use the Customs classification, more than doubled in 1994. In the first nine months, the UK exported £103.5m worth to countries outside the European Union, compared with £47.9m in the equivalent period in 1993.

On Friday, the Government announced the trade deficit had doubled between November and December. But the gloom was shortlived: economists queued up to declare that this was a just a hiccup. Exports grew by 11 per cent last year and, according to Oxford Economic Forecasting, they will climb by another 10 per cent in 1995. British overseas sales are on a roll.

As ever, these broad statistics hide a myriad of stories. At their most detailed, these are tales of dogged managers pursuing elusive officials in far-off capitals, or negotiating for hours on end in soulless hotel rooms.

But there is another level at which exports can be analysed statistically. Thanks to the EU, it is now necessary to examine two separate sets of figures - one for exports outside the EU and one for "dispatches" within it. By delving into these, it is possible to find which products have been doing well, and where.

It is true, of course, that conditions for UK exports are highly favourable. A combination of weak domestic demand, a competitive currency and strong growth elsewhere is a sure-fire formula for success. But exporters have been offered that combination before - and have failed to take advantage of it.

What has happened, observers say, is that British companies are no longer regarded with suspicion or derision by foreign buyers because they are so much better than they were. The improvement in management standards started after the 1980-81 recession, when businesses realised that if they did not improve, they would disappear.

But it really took off during the latest downturn. "The 1990 recession caused an enormous increase in the spread of best practice in British industry," one senior industrialist says. "It has been talked about for a long time, but now it really is everywhere."

While business was booming in the late 1980s, the introduction of total quality and just-in-time systems remained in the pending file for many companies. It was only when it slumped that the file was opened. As a result, the pursuit of quality, which had been the preserve of Japanese- driven industries, started to spread. It is not uncommon now to find small, noisy factories equipped with computers that allow their workers to monitor and measure product quality.

In addition, the "1992" single market process made it easier for British companies to sell on the European continent by forcing them to change the technical standards to which they worked. The German DIN standard became the norm. UK companies cursed as they adapted to it - but now they can reap the rewards by tilting at the biggest market in Europe.

It seems likely that Black Wednesday - the day in 1992 when sterling left the European exchange rate mechanism and immediately devalued by 15 per cent - merely triggered an export surge that was waiting to happen. Not that the weakness of sterling, or more particularly the strength of the mark, has been unimportant. It made German companies consider buying abroad for the first time - and when they did, they had a shock. Mercedes- Benz looked at British component suppliers and found they could produce the same quality for 60 per cent of the cost. The Germans still do not like importing parts - but if their currency continues to rise as it has in the last week, they will have little choice.

In fact, Germany was not one of the strongest markets last year. Although British exporters increased sales there by 9.1 per cent, they did much better elsewhere. The biggest growth came in Spain and Italy. As both countries have weak currencies, the argument that the export surge is currency-driven becomes hard to sustain.

Banknotes aside, where have the British been particularly successful? Overall, motor industry exports rose by 12.6 per cent - good but not astounding. Much of the volume came from the build-up in Japanese-owned plants selling to Europe. But the most spectacular successes came outside Europe, where car sales rose by 28 per cent to £1.2bn (all figures, except those for Rover, refer to the first nine months of 1994, the latest period for which full statistics are available).

The Americans were the biggest non-EU customers. They bought £390m worth of British cars, up 33 per cent. Rover, which has taken the market by storm with its Range Rover and Discovery, saw its American sales volume rise by 143 per cent.

Asia, largely ignored by UK car makers since the end of the Empire, is being rediscovered. Rover sold 8,000 Minis in Japan last year - it is the biggest market for the car. Overall car sales to Japan were £138m.

Even more surprising is the success in once strong markets the British thought they had lost for ever. In Malaysia, car sales rose by 22 per cent to £62m; in Thailand they were up 79 per cent to £59m; and in Singapore they were £57.1m, up 80 per cent.

Even though Britain does not have a single home-owned television maker, Japanese transplants factories have taken up the slack. Exports to the EU of colour televisions more than quadrupled in the first nine months of 1994, leaping from £103.9m to £441m. The Germans bought £130.5m worth, compared with £18.7m; the Dutch bought £89.7m against £7.2m; and the French bought £62.6m, compared with £29.8m.

The most interesting tale is in the eastern bloc, where the Japanese have been setting up distribution networks. Non-EU sales of colour televisions went from £48.8m to £108.9m, mainly because Russia bought £43m worth. The Russians barely figured in the 1993 statistics.

Sony, which has its biggest European plant at Bridgend in South Wales, has been leading the drive. "It took time to set up a dealer and service network in Russia," a spokesman says. "We only really got going last year."

The message must be an optimistic one. Germany with its "supermark" will be even easier to sell to this year. British exporters have a toehold in fast-expanding markets in Asia, and new ones in eastern Europe. What they must not do is to drop everything and turn back home if British consumers re-open their wallets. It will be the real test of how new and improved management really is.