UK SMEs shift trade focus towards Europe as US tariffs hit exporters

UK SMEs are increasingly turning to European markets after facing significant disruption from US trade tariffs, according to new research from Bibby Financial Services (BFS).

The lender’s annual Trading Places report found businesses trading internationally have lost an average of £59,000 over the past 12 months as a result of US tariffs. More than a quarter (26%) of firms said they are reducing the number of US customers they work with, while 17% said they are scaling back US trade because it no longer aligns with their business ethics and values.

The report found 57% of businesses are now shifting their focus towards Europe and other non-US markets. Among exporters, France (36%) and Germany (35%) have overtaken the US (29%) as preferred trading partners. Importers also reported changing priorities, with China matching Germany as the leading import market, both cited by 34% of respondents.

The findings coincide with the 10th anniversary of the EU referendum. More than half (53%) of SMEs surveyed said Brexit has reduced their competitiveness in international markets, while 57% said complying with post-Brexit trading rules has negatively affected their profitability. The research also found that 62% would now vote to remain in the EU if another referendum were held, compared with 51% who supported remaining in 2016.

Derek Ryan, chief executive officer for North West Europe at Bibby Financial Services, said: “The unpredictability of US tariffs has caused huge issues for UK SMEs in the past year, rupturing business relationships and leading many to rethink their trading strategies. As a result, we are witnessing a practical pivot back toward Europe – a large and accessible market that offers more predictable trading conditions and less complexity for importers and exporters.”

The report also found growing frustration with Government support. Nearly two-thirds (65%) of respondents said the Government is not doing enough to help SMEs trading internationally, while 68% called for clearer guidance on dealing with tariffs. More than a third (37%) said they would like the UK to rejoin the European Union.

Ryan added: “A decade ago, SMEs in the UK looked to the US to fulfil the promise of more trade, better terms and a future outside the EU. Despite challenges associated with post-Brexit compliance, there’s clearly now an appetite for closer ties with Europe in the wake of US volatility. The Brexit cake can’t be unbaked and there appears to be little political appetite to do so. However, the Government can still do more to support SME growth by reframing the UK’s relationship with the EU and seeking tangible measures to reduce trade friction. Fundamentally, this is about redressing the balance between political ideology and stimulating economic growth.”