UK small and medium-sized businesses are placing greater emphasis on European markets as uncertainty over US tariffs adds to the cost and financial risk of trading internationally.

Research from Bibby Financial Services, a provider of working-capital finance and foreign exchange services, reveals that 57 per cent of UK importers and exporters were directing more activity towards European and other non-US markets.

France and Germany now rank ahead of the US among the export markets used by businesses surveyed. Some 36 per cent said they exported to France and 34 per cent to Germany, compared with 29 per cent trading with the US.

A year earlier, the US ranked first, while France and Germany were each cited by 13 per cent of respondents.

The findings come from Bibby Financial Services’ annual Trading Places report, based on research among more than 500 owners and decision-makers at UK SMEs involved in international trade.

The figures measure how many businesses trade with each country, rather than the proportion of revenue generated in those markets. However, the year-on-year comparison suggests that SMEs are spreading their trading relationships across a wider group of European countries.

More than a third of exporters said the value of their US turnover had fallen because of tariffs, while 27 per cent had reduced their presence in the country because of political or regulatory uncertainty.

European markets gain ground

European countries have become more prominent among both exporters and importers. The proportion of surveyed businesses exporting to France rose by 23 percentage points over the year, while Germany increased by 21 points. Ireland and Canada also recorded increases, suggesting that businesses are diversifying rather than replacing the US with a single alternative market.

Import patterns remain more geographically mixed. China was the leading source market, used by 34 per cent of importers, while Germany rose from 12 per cent to 31 per cent and France increased from nine per cent to 23 per cent.

The average number of suppliers used by respondents also increased from 13 to 15.

Bibby Financial Services linked the growth in European sourcing to shorter transport routes, established trading relationships and attempts to limit exposure to disruption.

Derek Ryan, chief executive for North West Europe at Bibby Financial Services, said tariff uncertainty had caused businesses to reassess their international strategies.

“The unpredictability of US tariffs has caused huge issues for UK SMEs in the past year, rupturing business relationships and leading many to rethink their trading strategies,” he said.

“As a result, we are witnessing a practical pivot back toward Europe — a large and accessible market that offers more predictable trading conditions and less complexity for importers and exporters.”

The results indicate continued activity with the US and China alongside a larger European footprint. They do not point to a wholesale withdrawal from distant markets, although they suggest that tariffs, political uncertainty and transport costs are playing a greater role in decisions about where to trade.

Cashflow pressure spreads across supply chains

The financial consequences extend beyond the direct cost of tariffs. Sixty-nine per cent of respondents said international trading conditions had increased pressure on cashflow during the previous 12 months.

Higher shipping and logistics costs were the most commonly cited cause, affecting 61 per cent of businesses. Delayed payments from overseas buyers were identified by 42 per cent.

Payment terms are also becoming harder to manage in both directions. More than a third of respondents said overseas partners had requested payment upfront, while 29 per cent had experienced late payments from international customers.

A further 26 per cent reported an increase in customer insolvency. Businesses can therefore face demands to pay suppliers earlier while waiting longer to receive money from customers. This increases the amount of working capital tied up in an international transaction and leaves less room to absorb unexpected costs.

The findings are relevant to lenders and fintech companies serving internationally active SMEs. Firms trading across more suppliers, currencies and jurisdictions may require multi-currency accounts, local payment collection and clearer information about settlement times and conversion costs.

Longer collection periods may also increase the use of invoice finance, trade finance and other forms of short-term business funding.

Currency movements add to trading costs

Foreign exchange exposure has become another source of financial pressure. Forty-four per cent of respondents said currency movements had negatively affected their businesses during the previous year. Among those affected, the average financial impact was estimated at £71,600.

Two-fifths said exchange-rate volatility had affected profitability, while more than half had adjusted their foreign exchange strategies in response.

Currency volatility was cited as a leading challenge by 29 per cent of exporters, up from 25 per cent in the previous year.

The risks are particularly pronounced for businesses that import materials and export finished products, as costs and revenues may be exposed to movements in different currencies.

The survey also identified concerns around payment security. One in five respondents had experienced an attempted fraud involving foreign exchange, while 13 per cent reported phishing or invoice-redirection attempts.

Among businesses affected by conflict in the Middle East, 22 per cent had experienced payments being delayed or blocked because of sanctions. These findings place payment verification, sanctions screening and visibility over currency exposure alongside speed and price as priorities for companies providing international financial services.

Brexit remains part of the calculation

The growing focus on Europe comes as businesses continue to report additional costs associated with the UK’s departure from the European Union.

More than half of respondents said Brexit had reduced their competitiveness in global markets, while 57 per cent said the cost of complying with post-Brexit trade rules had affected their profits.

Among the internationally trading businesses surveyed, 62 per cent said they would vote to remain in the EU if the 2016 referendum were repeated. More than a third wanted the government to seek re-entry, although this remains outside current government policy.

The more immediate requests centred on practical support. Some 68 per cent wanted clearer guidance on managing tariffs, while 65 per cent believed the government was providing insufficient support to SMEs.

The research was conducted by Critical Research between 29 April and 12 May 2026 across the manufacturing, construction, wholesale, transport, retail and services sectors.

Its findings describe an international trading environment in which SMEs are dealing with uncertainty over when they will be paid, how much overseas revenue will be worth and how much funding they need to complete an order. Payment companies, lenders and FX providers will face growing pressure to give those businesses greater visibility and control as their trading relationships become more widely dispersed.