International Business Expansion Report: The cost of global expansion

The UK’s SMBs are facing a raft of economic challenges. From rising energy costs, record inflation, staff shortages and supply chain disruption, the headwinds for SMBs are building into a perfect storm. Faced with a darkening outlook in the domestic market, many entrepreneurs and SMBs are shifting their focus overseas to tap into growth by expanding business globally. But even here they face rising costs.

New research from Public First, commissioned by Wise, has found that Small and Medium Businesses (SMBs) in the UK lost an estimated £3.6 billion in transaction fees while selling goods and services abroad in 2022. The figure for all businesses was an estimated £4.2 billion. Transaction fees for cross-border transfers and payments are often hidden within the exchange rates quoted by banks, which are often considerably worse than the mid-market exchange rate at the time, allowing them to pocket the difference between the two to boost revenues. This means many SMBs are unaware of the overall transfer fee, which can eat into their operating margins and have a serious impact on cash flow.

Research by Censuswide commissioned by Wise found that of the quarter (25%) of SMBs who were planning to enter new markets in order to expand their business, a combined 59% are looking to take operations overseas, compared with 39% who were planning to expand their business internally in the UK market. The top destination for international expansion is the EU, with a quarter (25%) of SMBs targeting growth in the bloc, followed by North America (15%) and East Asian countries including China, Japan, Singapore and South Korea (6%).

For many of these businesses, entering a new market will mean overcoming a litany of technological, administrative and trade-related challenges. Integrations such as customs management software and efficient payments infrastructure will be high on the list of priorities. Financial services providers have a key role to play here, and can help support SMBs with their plans for growth, by providing fast, low-cost and transparent international payments which make it clear how much international transfer fees are costing their business.

Wise Business is the easy to use business account from Wise. Put simply, it’s business banking* without the high rates, hidden charges, and monthly fees.

In the UK, businesses can use Wise to:

• Pay employees and vendors across borders
• Get paid in multiple currencies
• Earn 1% cashback with business debit cards
• Manage cash flow by connecting to accounting software
• Control outgoings by letting employees spend with business expense cards

Our ambition is for Wise Business to be the only account international businesses need for all the jobs they need to do, including getting paid, paying employees and suppliers, as well as managing cash flow, treasury and expenses.