MOO in the FT

FT Article

By Jonathan Moules in the Financial Times

Published: December 12 2008 22:22 | Last updated: December 12 2008 22:22

The opportunity for UK companies to export their goods and services – the one piece of good news from the current weakening of sterling – is being stifled by a lack of government support, according to businesses and employers’ groups.

The decline in the pound to a record low against the euro this week is another blow to many small and medium-sized companies that sell locally but rely on imported raw materials.

It has been welcomed, however, by those selling abroad.

Aircraft Materials UK, a supplier of metal alloys to the aerospace, medical and electronics sector, gains about half of its revenues outside the UK. But Udo Paul, who founded the business in 2001 after being made redundant at the age of 54, claims that his growth is undermined by bureau-cracy and delays by the taxman.

His main gripe is about VAT, which he must pay on raw materials entering the country from the US, but can then claim back when the final manufactured goods are sold.

While Aircraft Materials’ customers usually pay within 10 days, Paul claims that he has to wait weeks for the VAT to be returned, which eats into his cash reserves.

“We are subsidising the government while we get our VAT,” Paul said, adding that the tax owed amounts to about half his margins. He is also angered by the amount of form filling involved.

When the value of goods traded within the EU passes £260,000, the business must complete Intrastat supplementary declarations to help the government compile European trade statistics.

This is difficult for a business with just seven employees, according to Paul. “It all costs time and time costs money,” he said.

A spokesman for HMRC defended the tax office’s procedures. “HMRC has an internal operational target to process all VAT returns within 10 days, which it is meeting fully,” he said.

“Where a VAT repayment claim needs to be verified further, but is not finalised within 30 days without valid reasons, a repayment supplement will normally be paid to the business.”

However, companies selling abroad are enjoying an uplift from the current weakness of sterling.

Moo.com, an online printing business, gets half its revenue from selling personalised business and greeting cards to customers in the US. A 25 per cent decline in the pound’s value against the dollar raises Moo’s revenues by 12.5 per cent, according to Richard Moross, the company’s founder and chief executive. “It has been fantastic for us,” he said.

But too few British companies are taking advantage of the opportunity to export, and a lack of government support abroad is partly to blame, according to Stephen Alambritis of the Federation of Small Businesses.

“Exporting still has a fear factor for a lot of small businesses,” he said. “It is pitiful that we have on average six commercial staff in each of our overseas embassies and the diplomatic side is into the 60s and 70s.”

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