Small and medium-sized enterprises (SMEs) account for over 99% of all UK businesses and about 50% of all private-sector employment and turnover. Moreover, they are a key player in the UK’s economic growth and this is the reason the UK Department for International Trade (DIT) has prioritised them in its export action plan.
DIT has acknowledged the challenge of problem-solving skills and innovation that deters the growth of SMEs and devised a mitigative action plan. Part of the plan by DIT is to provide funding for SMEs through the Internationalisation Fund. So far, in the UK Government’s financial year 2019/2020, DIT spent 34% of its budget on SMEs surpassing the 33% UK Government.
Read on to learn everything about the Internationalisation Fund in the UK for SMEs. This article gives an overview of the Internationalisation Fund and its purpose. It will also unveil details on who should receive the funding, types of funding available, its use, funding exclusions, and how SMEs can apply for the funding.
What is the Internationalisation Fund?
The Internationalisation fund is a co-investment grant scheme initiated and sustained by the Department for International Trade (DIT) of the United Kingdom (UK) Government. DIT spearheads the success of British trade across the globe using European Regional Development Funding (ERDF) for UK companies to maximise business opportunities in the international market.
Who provides the Internationalisation Fund?
The UK Government’s Department for International Trade (DIT) provides the Internationalisation Fund through its budget allocation every financial year.
What is the purpose of the DIT Internationalisation Fund?
The fund is part of the UK government’s strategic plan to grow its exports by providing additional financial support to SMEs to help them intensify their international trade and stabilise their business operations.
UK SMEs have demonstrated their power in advancing the economy via their output. DIT funding will further assist them to expand, utilise the international opportunities the UK is creating for its companies and in turn increase the UK’s economic performance locally and internationally.
How much Internationalisation Fund is available for UK SMEs?
The UK Government through the DIT set aside £38m on 16th October 2020 to support its 7600 SMEs to internationalise. The UK also sought to support the recovery of its firms affected by the COVID-19 pandemic by expanding their overseas trading activities.
Who can receive funding?
Both new entrants into the export trade and existing exporters can receive the Internationalisation Fund. Existing exporters should, however, either be seeking entrance into new geographical markets or launching new products or services.
What kind of activity qualifies to receive funding?
To qualify for Internationalisation Fund support, an activity should have value addition. It should not be a mere extension of the current business activities. These activities can be encompassed in SMEs with high-level objectives or high growth potential.
High-level objectives whose activities qualify for the co-investment funding in DIT
SMEs seeking the Internationalisation Fund from the DIT should run high-level objectives approved by the DIT.
- Firms starting to export: SMEs purposing to start exporting activities qualify for this funding. They are new entrants into the export industry.
- Entrance into a new market: the DIT Internationalisation Fund covers firms seeking to penetrate new geographical locations, break new barriers hindering business, venturing into new sectors or have new products or services for the market.
- Improve international processes: Running an export business can be hectic especially when working on productivity. The DIT Internationalisation Fund supports such businesses to improve their international processes. Improved international processes facilitate export efficiency consequently boosting trading activities.
- Increasing export performance: Businesses striving to significantly increase their export performance can receive the Internationalisation Fund to give them a boost so they can trade competitively.
- Creating more than 2,200 jobs: UK SMEs on the move to create more than 2,200 jobs through their export businesses are entitled to the Internationalisation Fund so they can Fastrack their objectives.
SMEs with a high growth potential (HGP) qualify for co-investment funding in DIT
There are UK SMEs in the international export space with high growth potential. They also qualify for the DIT Internationalisation Fund. The DIT has determined that firms with the following characteristics potentially fall in the category of high growth potential (HGP) SMEs.
High international potential: Rapid and sustainable growth in the international trade market are part of the characteristics of SMEs in the export industry with high international potential. The DIT Internationalisation Fund can help such firms strengthen their grip in the international market.
Products or services for new international markets: Entering new international markets with new products and services need adequate financial resources to penetrate the market. The funds also facilitate their business operations right from meeting legal requirements to the actual product or service sale. UK’s DIT is providing funding for such SMEs so they can enter the market with ease.
Export as a growth plan: If the management of an SME sees export as their growth plan, they can table their case to the DIT so they can get funding to implement their export activities.
SMEs targeting £500k + sales/turnover: If a firm in the export sector is targeting £500k or more, it can apply for the Internationalisation Fund so it can boost its activities to realise its revenue goals. Small companies with significant potential can also receive funding.
An open-minded approach to suitability: Flexibility in target SME size can also qualify a firm to receive funding for its international trade operations.
Types of Internationalisation Funds available
SMEs can receive a co-investment of between £1k – £9k. The actual amount a firm can receive is determined by its Local Enterprise Partnership (LEP) allocation. LEPs allocate the ERDF support to have amounts of funding available to reflect their contributions.
Features of the Internationalisation Fund
- Each SME can only make one application and one claim.
- Fund allocation adheres to detailed eligible expenditure guidelines
- Online application and claim processes include eligibility checks
In which areas is the Internationalisation Fund available?
The Internationalisation Fund is available in all regions in the UK except Cornwall & Isles of Scilly because it has its own similar finance funding plan for its SMEs.
How can SMEs use Internationalisation Funds?
SMEs can only use Internationalisation Funds for approved activities as highlighted below.
Eligible expenditures of the Internationalisation Funding
Eligible expenditure entails approved spending that the DIT has determined to steer the main funding objectives of businesses including a high growth potential and having high-level objectives.
The bottom line is that the support activities have the potential to meet the government objectives for internal trade which include sustainable growth that triggers economic growth to the country.
Eligible expenditures include:
- Trade missions, trade fairs, and independent market visits to discover new international markets and establish links for UK SMEs’ products and services.
- Accessing finance to support international growth since it is financially overwhelming for SMEs to gain stability in the international market.
- Understand market standards, regulations and requirements. Successful export in the international market needs SMEs to keep pace with market standards as they vary from one region to another. Different areas of the international market also have different legal procedures that define business operations.
- Sales, market and research. Market research is capital intensive as businesses must study and understand the needs of their target market and determine whether the products and services, they are ushering into the market meet the needs of their market. For instance, market research is a reliable tool to help a business find out the perception the international market has of its products and services so it can determine whether to continue with business in that area or to keep searching for a receptive and ideal market in other areas.
- Consultancy and other international commercial services. SMEs may not have experts conversant with all policies and legal procedures in other parts of the world. They can seek consultancy services from experts with specialities depending on their business needs. Some business consulting needs may involve legal services and preparation of operational documents with guidelines and policy procedures.
Exclusions from Internationalisation Funding
There are some exclusions that the DIT Internationalisation Fund does not support. This article categorises them into ineligible sectors, ineligible companies, ineligible expenditures, and unsupported activities.
- Unsupported activities: DIT’s OMIS Service, Transport and Logistics, Packaging production, Export insurance, Export documentation services, Sales agent’s commission, Export training leading to qualifications, Warehousing, Assets such as Intellectual Property, standards or accreditations, eCommerce platform registration fees, Production of Sales collateral.
- Ineligible expenditures: Purchase of assets, salary/employment costs, capital expenditure, routine expenditure, direct subsidies, and production/operational costs.
- Ineligible companies: Breaching export controls, offering illegal products, products that could cause offence or embarrassment to the UK Government, and those likely to transfer their operations overseas.
- Ineligible sectors: Tobacco, aquaculture, fisheries, airport infrastructure, nuclear, schools/school-age educational establishments, financial and insurance institutions, primary agricultural productions, distribution and infrastructure, energy generation, transport and related infrastructure, synthetic fibres, shipbuilding, primary coal and steel production.
How SMEs can apply for DIT Internationalisation Funding
SMEs can apply for the Internationalisation Funding by:
Step one: Making initial contact with the DIT’s Regional Network.
Step two: Discussing their plans with an adviser at the DIT’s Regional Network.
Step three: Settle and agree on an export action plan with the adviser.
Step four: If the DIT finds their support suitable for the business, the DIT adviser will provide further application details on how to proceed with the application for the fund.
Please note: The rules of the Internationalisation Fund are being tweaked as the programme unfolds so please ensure you check on the details of the latest position in case this affects your application.
How Boardroom Advisors can help
If you don’t currently have board level expertise in export available within your business then you could consider working with a part-time export director. You can learn more about what an export director does and how they could support your business and most importantly how our part-time advisory model works to support businesses like yours grow.
An export director working within your business would take the lead role in helping to apply for the DIT Internationalisation Funding as well as help develop and implement your export strategy. For more details on how we can best support you contact us to speak with you local Regional Director.