View your shopping bag

Items: (0) £0.00
  • €
  • $
  • £


No sign of an export-led recovery

The UK’s deficit on trade in goods reached a record level of £9.2bn in December, and compares with a deficit of £8.5bn in November. Exports rose by £0.3bn and imports rose by £1.1bn, according to figures just released by the Office for National Statistics.

Fortunately, the surplus on trade in services remained robust in December, although at £4.4bn it was still below the £4.5bn recorded in November. Overall, this means that the UK’s deficit on trade in goods and services was £4.8bn in December compared with a deficit of £4.1bn in November. This is the highest figure for five years. The recent downward trend can be seen in the graphic below.

Balance of Trade Source: ONS

When oil and erratic items are excluded, the volume of goods exports fell by 1.3% but the volume of goods imports rose by 1.4% compared with November. At the same time, export prices of goods rose by 1.1%, whilst import prices rose by 1.5% compared to the previous month.

It has been mentioned that the snow before Christmas will have affected the trade figures, but it is difficult to see why it should have hit exports harder than imports. So where does that leave our ‘export-led recovery’. The news is not all bad, in as much as recent increases in commodity prices, have had an impact in boosting the value of imports as detailed above. At the same time, increased imports of components and raw materials required by our manufacturing industries may be, at least in part, responsible for the rise in imports. The hope is that as manufacturing gears up to increase production, this will be reflected in greater export sales.

On the other hand, a report just published by the British Chambers of Commerce (BCC) which polled 8,000 UK companies, found that 70% of them only sold their products in the UK. Of these, nearly three-quarters thought that they had unsuitable products and services, a fifth believed they had sufficient business in the UK market, nearly 10% said they lacked ‘the resources to make it happen’, and almost 10% said they would need help finding overseas customers.

This was summed up by David Frost, director general of the BCC, who said: “Too many of our companies lack an exporting culture, even though they produce high quality goods and services. We cannot rebalance Britain’s economy when so many companies say they’re simply not ready or able to take their products overseas.”

Although the government is encouraging British firms to aim at the rapidly growing emerging markets in India, China, Brazil and Russia, this is not happening to any great extent. The US, Germany, Netherlands, France and Ireland remain our top five export markets, and we seem to be enmeshed in our traditional markets.

Yesterday, Vince Cable, Business Secretary, announced some funding and insurance measures to encourage British firms to export, but it is doubtful how effective this will be. The BCC survey mentioned above found that 65% of all businesses surveyed were not aware of the current government help through the Export Credit Guarantee Department, and 90% of those companies that have exported have never applied for or used its services!

Tags: , , , , ,
Posted in Balance of Trade

Comments are closed.