Despite challenging economic conditions, over a quarter (28%) of domestic businesses plan to expand internationally within the next three years – the highest level recorded in four iterations of the Trade Barometer. This aligns with global trends, as many businesses in the US (47%), Spain (35%), and Poland (39%) also consider overseas expansion.

Almost a third (30%) of UK businesses surveyed in Spring 2024 expressed high confidence in their growth over the next three years, an increase from 22% in Autumn 2023. Overall, three-quarters of businesses are optimistic about their future growth prospects.

Businesses with international ambitions are also leading in incorporating ESG into their strategies, with almost three-quarters (74%) feeling increased customer pressure to meet ESG standards. Similarly, 78% reported having a clear ESG strategy in place.

Jane Galvin, Head of Corporate Clients, Santander UK, said: “The latest wave of the Santander Trade Barometer shows that despite a spate of economic challenges, UK businesses are increasingly optimistic about their growth potential. Businesses are embracing ESG considerations as integral to their strategies, reflecting a broader shift towards sustainable practices, an encouraging sign for the future of our economy.”

International growth opportunities versus other markets

In terms of business confidence in international trade, the UK leads other markets, with 28% of international trading businesses expecting over half their revenue to stem from global trade in the next year. This compares to 25% in Spain, 20% in the USA, and 17% in Poland. Currently, 47% of US businesses view the UK as one of the top trade destinations, ranking just behind Canada at 50%. Additionally, 39% of US firms see the UK as the principal growth opportunity for the coming year.

For UK companies, the US remains the foremost destination for future expansion (35%), followed by Canada and Australia (21% each), Germany (20%), UAE (16%), France (15%), and China (12%), with EU countries showing a decline in preference in this survey wave.

Spanish businesses identify neighbouring France and the US (19% each) as the largest growth opportunities, with Germany next at 15%. In Poland, businesses pinpoint Germany and the UAE (17% each) as key growth areas, with the US close behind at 14%.

The economic backdrop

Despite the surge in confidence, challenges remain. Inflation is still the single greatest economic challenge for UK business, with 48% of UK businesses stating that it is currently a risk for business growth in their organisation, compared to 40% in the USA 40%, 37% in Spain, and 47% in Poland.

Inflationary costs linked to staffing and salaries persist, with 4 of the top 5 business risks identified in the survey being directly cost related. Businesses highlighted energy prices (30%), high interest rates (cost of servicing debt) (25%), and the cost of moving goods more generally (22%) among the greatest risks to their business growth in the current market environment.

Against this backdrop, almost half (47%) say that international trade is of increasing importance – more than double the number saying this in Autumn 2021. However, when looking to the future, UK businesses see inflationary pressures as temporary and are optimistic about inflation dampening in the next 12 months.

‘Nearshoring’ and supply chain resilience

An increasing number of firms are putting an emphasis on gaining insight into their supply chains, with a greater desire for transparency (55%) and validating processes (46%) – both drivers up more than 10 percentage points compared to the previous wave of the Trade Barometer.

The Barometer shows that there is a notable trend of 'reshoring,' with roughly a third (30%) of UK businesses already having plans to move (14%) or have moved their supply chains closer to the UK (16%) to enhance resilience and mitigate geopolitical risk. A further one in five businesses (22%) already have their supply chains close to the UK.

Currently, almost one quarter (23%) of UK businesses with supply chain dependencies in China are actively pursuing reshoring strategies. This shift underscores the importance of supply chain resilience in today's uncertain geopolitical landscape and reflects a strategic response to mitigate risks associated with global supply chains.

Charting a course for the future

According to the Barometer, there are heightened calls among UK businesses for government and third parties to support with international trade ambitions. Over one third (35%) call for help with reducing regulatory requirements and bureaucracy overseas, an increase of almost 10% compared to the Autumn wave in 2022 (26%).

Jane Galvin, Head of Corporate Clients, Santander UK, added: “Bureaucratic challenges are amongst the biggest barriers to international trade for businesses large and small, and there is a clear demand from companies for help to overcome this, so they can drive their international growth ambitions.

“At Santander, we are uniquely positioned to provide support to growing businesses through our sector and country experts, partnerships with trade, industry and international bodies, and our online platform Santander Navigator.”

Lord Offord, Minister for Exports, Department for Businesses and Trade, said: “It’s great to see business sentiment is on the rise and more and more companies are seeing the benefits of trading internationally.

“We’re backing British businesses by knocking down trade barriers, signing new trade deals, giving expert advice via our Export Support Service, and funding through UK Export Finance – our award-winning export credit agency.”