SMALL and medium-sized enterprises – SMEs – are reluctant to expand overseas, with only a quarter planning to increase their international sales over the next year, according to a Baker Tilly survey.

It found that the main reason holding businesses back is perceived cost, with 90 per cent of the 750 respondents indicating that international expansion would be too expensive, while 70 per cent said they feared a loss of control.

The survey showed a marked difference between London and the rest of the UK.

While almost half of London-based SMEs were active internationally, in most other regions, the equivalent figure was generally between 20 to 30 per cent, with 29 per cent in the South.

The survey found that some industry sectors were more active in international markets.

Between 60 to 70 per cent of manufacturing, food and drink, and energy and natural resources companies reported that they have international or export operations, and over 50per cent of manufacturing and energy and natural resources businesses said they plan to do even more overseas next year.

Baker Tilly’s Head of Corporate Finance for the South, Kirsty Sandwell, said: “Overseas expansion can be a great opportunity for some, but there are pitfalls for the inexperienced or unprepared, and businesses would be wise to seek advice and take advantage of the networks and opportunities provided by UK Trade and Investment or the British Chambers of Commerce.

“One opportunity that is often overlooked is expanding through cross border mergers and acquisitions.

“This is normally perceived as high risk but in some cases, it can be the low risk option, providing the best way of breaking into an unfamiliar market rather than trying to build from scratch.

“As business confidence improves, M&A activity could increase this year, although a risk-averse attitude can be seen in the smaller value deals being done.”