With traditional trade markets providing less opportunity, companies are looking to diversify their export strategies and enter new growth markets. While there are inevitably challenges that accompany this move, banks such as Barclays have the tools, expertise, and global presence to help the opportunity become a reality. Treasury Today speaks to Karl Trumper and Baihas Baghdadi to find out more.
Karl Trumper
Head of Trade and Working Capital, UK
Baihas Baghdadi
Head of Trade and Working Capital, International (Americas, Asia, Europe and Middle East)
What opportunities do you see for the UK trade market in 2015? How do these translate into your client activities?
KT: Closing the UK trade deficit will be a key consideration in 2015, not only to rebalance the UK economy, but also to pave the way for growth – so getting companies exporting is a real opportunity for the UK and for businesses of all sizes in 2015. In fact, exporting has been proven to bring companies fresh ideas, innovation, new revenue streams, improved profile and credibility. Yet, only 20% of UK SMEs currently export.
At Barclays, we want to support companies to take the leap into new export markets, or to export for the first time. As such, we are actively encouraging clients – via roadshows and meetings, as well as partnerships with organisations such as UKTI and UKEF – to have confidence in the strength that ‘Brand Britain’ provides. British products and services are still considered very high quality and remain in demand, so there’s an enormous amount of potential out there for UK Plcs.
Another area where we are challenging clients’ exporting perceptions is around access to finance. While this is still difficult for some, we often find that clients do not always fully explore the opportunities on offer. So, in an environment of low interest rates and high liquidity, we encourage clients to leverage the expertise and business investment of banks like Barclays who are actively looking to innovate through their products and services.
Which sectors within the UK economy are poised for overseas growth this year?
KT: The opportunities are numerous – ranging from the manufacturing, engineering, creative and service industries to food and drink. These are all examples of sectors that are well placed with strong reputations and brands that can stretch into new markets, but, regardless of sector, I would say that all companies looking for export-led growth must focus on their technology. For those entering new markets, technology, even in the form of a web presence, offers a lower risk and lower cost entry point than bricks and mortar.
What about the geographical challenges and opportunities faced by UK exporters?
KT: With the Eurozone forecast for lower growth in 2015, and broadly half of UK exports destined for the European market, we are encouraging UK companies to consider exporting to higher growth markets, such as Africa, Asia and emerging Europe. Of course, some of those markets carry different political risks – and geopolitical uncertainty is a worry for exporters at the moment.
Also of concern are currency movements. We saw a strengthening of sterling across last year, and any further appreciation will be both positive and negative: it will cheapen imports; but for those companies looking at an export-based growth strategy, it will naturally affect competitiveness. That said, these concerns are not new – they are age-old exporting challenges – and it is the role of banks like Barclays is to support clients in mitigating these risks.
That means providing our clients with protection when trading overseas, helping them to generate liquidity, and to improve cash flow or to innovate on their balance sheets. Since Barclays is well equipped to do this, we believe there is more opportunity than challenge in exporting.
Why is Barclays so ‘well equipped’ in the trade space? What differentiates you from the competition?
KT: From a UK perspective, we have a 325 year history that we’re extremely proud of. It’s a history of supporting clients’ growth both domestically and internationally through the provision of trade solutions. That enables us to lean on the vast experience of working closely with clients and listening to them in order to ensure that the solutions we are providing today are the most appropriate to support their trade and working capital requirements.
Take our recent decision to join our Trade and Working Capital departments together in the bank, for instance. In order to better serve our clients, we have combined our trade finance teams with (historically separate) receivables financing specialists for trade and working capital. As a result, we have been able to extend our geographic footprint within the UK, whilst deepening our product set in a way that means we can deliver broader solutions, to more clients, more efficiently.
We’ve also recently brought together our business and corporate banking under one roof, so that we now have one team in the UK fulfilling client needs for businesses of all sizes. And while that might sound quite simple, it is really effective as it ensures that we can enable client growth by seamlessly providing specialist products and services aligned to clients needs’ as they evolve and grow through the continuum.
By the same token, we recognise that SME clients will always need a different level of support and service to the corporate marketplace, so we have 250 Trade and Working Capital specialists partnering with our relationship directors to service all of those segments appropriately. Going forward, it is our ability to leverage the scale and breadth of the Barclays group and our willingness to innovate, not just our trade and working capital expertise, which will set us apart.
Can you talk through some of the recent innovations that you have made?
KT: We already have a great product range, so we can service any trade need, but a current example of a new market-leading product, that is not available anywhere else, is the Barclays Advanced Overdraft. This is a technology-based solution which is working capital directed. It offers higher levels of funding than a traditional overdraft but doesn’t have the sometimes perceived, or actual, onerous administration that goes with an invoice discounting facility. So, clients get the best of both worlds.
Technology is a key focus for Barclays and will continue to be pivotal in proposition and service development. By the end of Q1 2015, we will have launched our new trade operating system which is designed to improve efficiency, transparency, accessibility and connectivity for clients to the Barclays global trade network. This represents a significant investment which signifies the level of ambition that Barclays has to grow our Trade business. It is designed to improve efficiency, transparency, accessibility, and connectivity for clients to the Barclays global trade network. That is an immense investment that has been developed over years, which is a huge step forward for Barclays and our clients.
How do the bank’s UK and international trade propositions dovetail?
KT: The way in which we bring together our UK expertise with our international capabilities is certainly a differentiator. Barclays is very well-equipped to support clients to grow internationally, whether that is from a UK base or otherwise. We are one of the largest players in the UK market, we already have 7,000 clients within the trade and working capital solutions area and we have the scale and reach to support any client, across any segment in the UK, with a fantastic range of products. Furthermore, our track record of financing UK exports – from the smallest of transactions to some of the largest facilities ever financed – speaks volumes of our commitment across the marketplace.
Looking internationally, our support for UK clients to step into overseas markets takes the form of specialist trade teams based across all the major European markets. We’re also exceptionally strong in Africa, the Middle East and Asia, not forgetting our presence in New York. We readily share our understanding of these markets with our clients – and this, combined with our in-country expertise and direct financial support, is what clients need to feel comfortable when trading overseas.
The International Trade Boutique
Barclays has been restructuring in the last year. How has this impacted the way that the International Trade team will be servicing clients going forward?
BB: In May last year, our Chief Executive, Antony Jenkins, announced Barclays’ Strategy for the coming years. Within the Corporate Bank our International Trade & Working Capital products are key to the strategy. We are focusing on regions and products where we have competitive advantage. At the heart of our strategy is a focus on our people and building up the new digital bank. Overall, we will focus on providing high-value add solutions-based approach: what we call the ‘boutique’ model.
What exactly do you mean by ‘boutique’ model? And how will clients benefit?
BB: A boutique model means having a high-quality tailored product proposition with a very clear core strategic client focus. It’s about being best-in-class in the types of products that we want to offer in our chosen markets, and only offering them to a selected number of clients – rather than trying to be a bank for every product in every market for any client. In summary: being relevant to our clients where they need our expertise with focus on excellent execution.
We actually piloted this model in our US business in 2014, as well as in Spain, with great success. What the pilot confirmed is that the large corporate clients, who already have plenty of banks, now want a partner. Barclays’ boutique approach means that our International Trade team becomes part of the decision-making process inside the client’s organisation by helping to provide a large strategic solution, rather than just offering an LC confirmation, for example.
Could you give any examples of this in practice, and how your approach differentiates Barclays’ trade team from others in the market?
BB: A good example of this is our recent work with the American subsidiary of an Indian group, looking for a cross-border receivables solution. When we approached this relationship, we took the time to identify the real opportunity, rather than just trying to shoehorn in a solution adapted to our risk appetite on the transaction. As such, we set out to discover what the real client needs were – and we leveraged with the interaction between our Indian investment and corporate banking colleagues, as well as our US and UK investment banking colleagues, to achieve this.
We came up with a solution that fits the entire spectrum of the client’s needs by syndicating the transaction internationally on the client’s behalf. So by inviting other banks to join, Barclays was able to present the client with a very efficient end-to-end solution.
When will the new model roll out to other geographies?
BB: Although we don’t expect the transformation to be fully complete this year, we are making rapid progress. Spain and the US are already complete, and we will be rolling out the rest of Europe during the course of 2015. Work is also in progress in Asia Pacific and the Middle East.
What client type is the boutique approach best suited to, in your view?
BB: Our ambition is to be recognised in the market as a leading transaction bank, offering boutique-style servicing not only for our existing clients, but for key new clients, too. At Barclays Corporate Banking, we are focussed on four key client segments: Global Corporates, Financial Institutions, UK Corporates (from SMEs up to the FTSE100) and Africa Corporates (of all sizes). From a trade perspective, Barclays has a global presence and have our strongest product capabilities in EMEA (Europe, Middle East and Africa).
Where do you see the biggest growth opportunities for your team, given this new structure?
BB: I would position the Americas business as the number one growth area for us. As I mentioned, we piloted the trade boutique last year in the US and we have had big success stories over there, where we were able not only to land interesting deals, but to also become lead arrangers for some major deals in both Q4 2014 and Q1 2015. These will soon be announced in the press.
While we are already large in Africa, it has also been one of our strongest growth areas. We recently hired a team in Lagos to ensure we had on-the-ground trade expertise in Africa’s largest economy Nigeria.
We had a super year in Asia in 2014, and I hope to consolidate and build on what we achieved last year across the region.
Despite the low economic growth predictions for 2015, Continental Europe remains the third priority for my team as we still need to finish up the implementation of our boutique model in Europe. We’re extremely excited about rolling this out to clients and we look forward to establishing even deeper partnerships with our existing, and new, clients over the coming months to years.
