Adam Afriyie is the MP for Windsor and Chair of All-Party Parliamentary Group on Fintech
It’s easy to have a certain image of an ‘international’ business: a vast conglomerate, shipping goods in great shipping containers across vast seas, endlessly reaching into new markets no matter how remote and disconnected. These businesses do, of course, exist. They sell drinks, toothpaste, and any number of gadgets. For these businesses, trading overseas is a matter of course – the web of logistics, payments, and relationships handled by legions of staff.
Yet most international businesses are far smaller in scale, and far leaner in their resources. In my Windsor constituency, many fantastic small and medium-sized businesses export to Europe and further afield. Businesses in towns and cities up and down the country may start small and trade domestically, but see moving into international markets as a key ambition for their growth. They aspire to trade globally and, like large conglomerates, will need to face the hassle that comes with operating across borders.
Much of that hassle is unavoidable. Small businesses have shown remarkable grit and ingenuity in handling disruptions, from conflicts to COVID. But some hassle is avoidable – indeed, it’s easy to solve.
Small business owners like Kathryn Strachan, who owns CopyHouse, a content marketing agency for fintech brands based in London, have bemoaned the complicated costs of cross-border payments when doing business in different currencies. And she’s not alone – when asked about the biggest barriers to growing overseas, 24 per cent of small businesses agreed with Kathryn in citing the high cost of international payments.
It’s a trade barrier that’s acute to business owners, but almost ignored by everyone else. MPs should be doing more to help, and it’s a shame this issue has not already been dealt with.
Too often, small businesses lose a fortune managing multiple currencies.
A particular problem is hidden fees: the difference between the ‘mid-market’ exchange rate (the one seen on platforms like Google and Bloomberg) and the one offered by providers. Banks and old-school providers will mark up their rate, hiding their fees.
A classic example of why this matters is Simon Fretwell, who runs RedboxVR, a company that ships virtual reality equipment across the world. For RedBox VR, operating across borders means working with suppliers and customers across the globe, along with the accompanying pains of regulation, supply chain disruption, and tariffs. This is an expensive undertaking – but even more so if each cost is several percentage higher than it should be, and costs can rack up given the size of orders.
All of us, from holidaymakers to students studying abroad, lose out to this. But small businesses get hit the worst. They’re handling larger sums of money, while also operating tight margins, meaning a hidden fee can be the difference between black and red, profit and loss. Some newer providers – Monzo, Starling, and Wise, for instance – do not hide their fees. But most providers still do. This is a nightmare if you are someone like Leticia Credidio, a sleepwear designer, working in multiple locations across the UK and handling suppliers and customers across the world.
Legislation could fix the mess. Existing payments legislation is supposed to enforce transparency, and ban hidden fees. Yet it is easily sidestepped. Worse, it doesn’t even apply to small businesses thanks to a ‘corporate opt-out’. This needs to go.
Tighter legislation would solve the problem. It would not only stop hidden fees, but also bring wider transparency and fair competition to the sector. That would mean time-pressed small businesses could then easily compare the market. Such a change would have wider benefits. The money saved on hidden fees – and gained by expanding overseas growth – would be reinvested into businesses, creating jobs, increasing wages, and aiding further growth. It’s a virtuous cycle.
In a world in which so much can seem bureaucratic, and so many problems intractable, it’s inexcusable that we are letting this one fester. A few strokes of the pen could do a huge amount to back businesses in their overseas growth. It is time to end the opt-out, and ban hidden fees. Whether they’re creating content, selling headsets, or stitching pyjamas, it is time to give small British businesses the opportunity to grow.
