With the pound sliding against the euro and the dollar, the outlook is suddenly brighter for British exporters. But how should businesses make the most of this opportunity as overseas consumers tighten belts and production costs soar?

The pound's fall in value on foreign currency markets is hardly a cause for celebration, but for exporters it does signal some welcome relief. For years it was the strength of sterling that made their goods more expensive to buy overseas and their businesses less competitive. But since August last year the pound's value has dropped against the dollar by more than 20 per cent, ending a run of relative strength that began over a decade ago.

According to Revenue & Customs, the total value of UK exports in June this year was just over £234bn, an increase of 8.1 per cent on the previous year, suggesting that the sector is rallying. But, as many exporters are discovering, currency valuation is only half the
story, as the prices of imported goods and raw materials have risen, driving up production costs, and a drop in consumer spending has depressed market demand.

"While exports are more affordable in price terms, it is equally true that consumers in other countries are feeling the pinch every bit as much as British people," says Lesley Batchelor, chair of the Institute of Export. "The fall in purchasing power of overseas consumers is undermining the benefits resulting from the declining value of sterling."

Consumer confidence is one of the main credit crunch victims, with less disposable income and cautious spending habits a global phenomenon. But while some exporters of luxury goods are feeling the squeeze, there are some things in life that people are not prepared to give up, including Scotch whisky.

Figures from Revenue & Customs show that UK exports of beverages and spirits have risen by 11 per cent in the past 12 months, and for some exporters of well loved brands sales are stronger than ever. The Famous Grouse and Cutty Sark are two of the best-known Scotch brands of the Edrington Group and are exported to more than 100 different countries. But it is within emerging markets such as China and Russia that the company has spotted opportunities to sell its premium single-malt whiskies, including flagship brand, The Macallan.

"There are a lot of people in these countries who have come into wealth and, in spite of the financial turmoil, want to buy the finest western luxuries and the most aspirational brands," says corporate affairs manager Emrys Inker. "Our aim is to secure better placings for premium brands in upmarket outlets, such as premier hotels, bars and clubs."

Currency fluctuations have had little impact on trade, thanks to a corporate strategy of hedging and forward currency buying, but Inker admits that the business is not completely immune from external cost factors.  "Our distillery business is energy-dependant and higher fuel prices will impact, albeit at a later date, given the lengthy time it takes to bring a good whisky to market," adds Inker.

Exporters manufacturing at volume level will be the hardest hit by higher production costs. But those selling high-value premium goods, or delivering cutting-edge product design, are continuing to do a brisk trade.

At Martek Marine, a Rotherham-based manufacturer of environmental and safety equipment for the global shipping industry, the prices of oil, coal, steel and other raw materials are more likely to affect business than currency fluctuations. "When rates are high, charter rates for ships are also high, meaning more money for shipping companies to spend on our products," explains marketing director Steve Coulson.

The company exports to 60 countries, employs 54 staff, turns over almost £10m a year, and anticipates business growth of 60 per cent this year. Their MariNOx emissions monitoring system for boats has captured 98 per cent of the worldwide market.

"Being at the innovator stage of the market for MariNOx, allied to the importance that oil majors and blue-chip shipping lines are placing on environmental social responsibility, means that demand for our products is increasing, especially across the eurozone," says Coulson.

Other product lines are aimed at complying with mandatory legislation, so demand is steady regardless of the downturn. "We look at legislation coming through over the next two, five or 10 years and develop products now to ensure that we are first to market, with a better price and margin," adds Coulson.

While experienced exporters are perhaps better equipped to trade through difficult conditions, new and potential exporters may struggle without detailed market research and a sound pricing strategy, says Brighton-based export consultant Graham Rhodes.

The best way to gain an insight into a destination market, he advises, is to attend an international exhibition relevant to a company's sector, to assess the local and foreign competition, and current prices. "Knowing that the euro can fluctuate against sterling, businesses should be pitching their conversion rates above the halfway mark to cover their bottom line. Any fluctuations should be the icing on the cake," says Rhodes.

Established exporters should be trading in no fewer than 20 overseas markets to reduce risks, and to manage shifts in foreign exchange they are advised to maintain currency accounts for markets where they are active. They must also be able to adapt their supply chains to take advantage of improved rates.

"Export market research has to be thorough and exhaustive, which takes time and money, but companies that turn to exporting as a knee-jerk reaction to the UK's difficult trading conditions will not survive," adds Rhodes. Exporters can access support through UK Trade & Industry, the government body that has identified priority sectors, including clean technologies, life sciences, healthcare, ICT and high-precision engineering, as having potential for growth. Its initiatives include the UK Soft Landing Zone programme, run in partnership with Coventry University Enterprises, to help small firms capitalise on the market potential of emerging economies such as China and India. Companies can also get help with attending overseas trade missions and trade shows.

Some businesses feel that too much available support is geared towards Far Eastern markets. PIXELearning, based in Coventry, specialises in applying computer game/simulation approaches to business education, vocational and management skills development. Launched two years ago, the company has been targeting corporate clients in the US, one of the toughest export markets.

"Programmes such as the UK Soft Landing Zone, which we have taken part in, are very useful if you are interested in exporting to China, but our main focus is the US, a huge market for which there seems to be little export assistance in the UK," says sales director Richard Smith.

Nevertheless, the company has been successful, capitalising on the UK's position as a global market leader in educational software development and securing business as a result of lower corporate spending in the US.
"Being recognised as a market leader in your field makes it easier to approach potential customers in a new market, while many large companies are saving on staff training costs by switching from expensive classroom-based learning to more cost-effective online solutions, like ours," says Smith.

PIXELearning has been affected by wider economic issues; banks unwilling to provide business loans and clients making late payments. But in spite of the financial volatility, export figures are rising and many industry experts are optimistic.

Batchelor sees the overall picture as positive, with the lowering of sterling's value creating a more level playing field for exporters compared with previous years. "For new exporters the experience will be scary, but well-seasoned exporters will know about peaks and troughs and will understand the importance of keeping customer relations across the world alive and well," she says.