Export or die. That is the very real situation facing the UK creative sector. Any business that doesn’t recognise that its long-term interests lie with sales in overseas markets will see margins decline as the competitive UK market becomes ever-more crowded.
As an island race, we have always existed on international trade. Now, instead of exporting relatively low-value, low-skill items, we trade with our expertise in design and innovation. The UK economy is no longer dominated by manufacturing, but by the service sector. The City leads the way as our biggest generator of invisible earnings, and the creative sector should follow this lead. The UK design market is saturated and the result has been narrower profit margins. Companies in the creative sector will only be able to maintain returns on investment by identifying and targeting international opportunities.
The UK is a world leader in creative services – our people, our work and our companies are recognised as the best by buyers around the globe. Innovation is something that the UK has long been renowned for; UK businesses are well placed to sell design services at a premium to eager global buyers.
Within the next five years, the two largest economies in the world will be the US and China. In the case of the US, this month’s hike in interest rates is one sign that the economy is on the up and up, while the recent unpalatable rise in the cost of oil is largely down to the continuing unprecedented demand from China as the economy races forward. In other words, whether you look East or West, there are booming economies and that presents opportunities for UK design.
The most recent figures available indicate that the UK exports something like £500m of design expertise a year, and that the US is the primary market, followed by Continental Europe, with China nowhere to be seen. It may well be that it takes another ten years for the Chinese economy to mature to the level where there are major opportunities, but history has taught us to get in early.
In China, design’s profile is growing – can you imagine a design conference being broadcast on TV in the UK, as it was recently over there?
The rate of development in the Far East is phenomenal. In contrast, the UK economy has been characterised by uncertainty and sluggish growth, particularly in the service sector. The past few years have been tricky for UK design – every time a revival seems to be starting, there is a new setback. Earlier this year, the economy looked strong, to the extent that interest rates were thought to be on the upward path again. The drop in rates earlier this month is a sign that the economy is not where we would want it to be. In these circumstances, it is only logical that we all look elsewhere for thriving markets.
The US is traditionally seen as a soft target for export. This is a language issue. But in reality it is a remarkably difficult market to crack if you don’t pay attention to local issues. Americans are as different culturally to us as any other country. China is culturally, linguistically and legally a challenge. But it is opening up; it is young, dynamic and ready to welcome the innovation that will drive it forwards.
There are plenty of Government and independent bodies aiming to help the design sector expand its horizons, from the Design Business Association to UK Trade and Investment. A more co-ordinated approach from these bodies would not go amiss, but if an international outlook is not in your blood, reaching new markets could be an unrewarding chore.
Many consultancies with roots in the UK have already found success abroad. But now, more than ever, it is important for groups to make this their focus. The Brewery’s work for Eastman Chemicals demonstrates that even among the most traditional of industries, there is plenty of scope for innovation when it can demonstrate real business benefits. It gives impetus to other consultancies to look beyond their own national borders for revenue.
Paul Stead is chairman of The Brewery
• Increased margins from dynamic markets. UK margins have decreased steadily in recent years
• Bigger opportunities – there are 60 million people in the UK, 6 billion in the world
• Growth – the UK is a mature market; less developed markets expand more rapidly
• Less competition – the UK is the world’s most developed market for design services
• Support – the design industry is backed by a range of bodies that are nurturing international trade
• Diversity – it’s never wise to have all your eggs in one basket. While one market is in recession, another will be booming
• Currency fluctuations – take financial advice before you start
• Culture – something that works in the UK will not necessarily appeal elsewhere
• Legal framework – different in every market
• Distance – some things have to be done face to face
• Time zones