If exports meant points in Eurovision – who would we be giving ours to when it comes to the Grand Final tomorrow? Let's have a look at the amount we exported to the Eurovision country finalists in 2012.

12 points – Germany – £32.56bn
10 Points – Netherlands – £23.68bn
8 points – France – £21.98bn
7 points – Ireland – £16.91bn
6 points – Belgium – £13.9bn
5 points – Spain – £8.29bn
4 points – Italy – £7.95bn
3 points – Sweden – £5.59bn
2 points – Russia – £5.52bn
1 point – Norway – £3.64bn

No points for the remainder of countries in the finals I’m afraid – Denmark (£2.65bn), Finland (£1.51bn), Hungary (£1.07bn), Romania (£944m), Greece (£845m), Ukraine (£581m), Azerbaijan (£509m), Malta (£396m), Lithuania (£371m), Estonia (£281m), Iceland (£201m), Belarus (£123m), Georgia (£56m), Moldova (£41m), Armenia (£15m).

Good luck to all for tomorrow (go Bonnie)!

Source:HMRC uktradeinfo

It’s Friday, so we are back to our weekly look at sectors. This week, with trade data out today (see my previous blog post) we thought a look at the export performance of different sectors would be interesting.

What we know from previous Sector Fridays…

- Nearly 30% of basic metals’ output is exported
- 83% of UK produced cars, 57% of commercial vehicles and 62% of engines, are exported
- Approximately three-fifths of food and drink exports go to the EU
- Pharmaceuticals is the second most export intensive manufacturing sector with half of output exported
- 53% of electronics exports went to non-EU countries in 2012, the first time a greater proportion of exports went outside of the EU

Let’s go a bit wider and look at (nearly) the full range of manufacturing sectors.

Exports according to sector, £million exported in 2012

Source: National Statistics

Motor vehicles topped the tree last year, with goods worth over £30.6bn exported, the chemicals and mechanical equipment sectors take second and third place with exports of £28.5bn and £28bn respectively. Today's trade data showed the value of automotive exports at its highest since at least 1998 (when the data series starts); the exposure of the sector to markets outside of Europe are holding it in good stead, around 45% of UK exports are to EU countries, compared with 70-90% for Italy, France and Spain, where the motor vehicles industry is looking less rosy.

The food and drink sector's output is mainly domestic consumption, with about 10% exported but the sector still boasts a healthy £16.8bn worth of exports in 2012, of which around three-fifths was destined for EU markets. Half of UK pharma output is exported and the sector runs a trade surplus with non-EU countries and a deficit with the EU.    

Given the UK's governments target for export performance - doubling exports to £1trn by 2020 - let's look at how sectors have fared in the past ten years.

Percentage change in export value by sector, 2002-2012

Source: National Statistics

This is a chart I like - with nearly all sectors showing positive growth in the value of exports in the past ten years. Only electronics posts a negative change in exports, with 2012 values 39% down on 2002 values. Consumers demanding lower cost options has driven a lot of production to be located in low cost countries, but the UK does benefit from being known as a niche manufacturing location and has a competitive advantage in the production of precision/high value instruments, it also has a strong research community and is home to 40% of Europe’s electronics design industry.

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Whilst I'm on the subject of exports - next week , 13-16 May 2013, is Export Week and UKTI are running events throughout the country to promote exporting to businesses. Seminars and events are being held to offer advice on how to go about doing business across the world, especially the fast-growing markets. Take a look at the dedicated website for more info and also follow #exportweek on Twitter.

Trade data is out today from ONS – and shows that exports rose in the first quarter of 2013.

The balance of trade in goods was at an estimated £9.1 billion in March, at similar levels to the previous month. Total goods exports increased by 4.9% to £25.7 billion with total imports increasing by 3.2% to £34.8 billion.

However, monthly figures can be volatile, and the strong rise in exports in March followed a weak February. But even looking at the first quarter of 2013, the value of export trade in goods rose by 1% and the value of imports was pretty much unchanged; the deficit shrank by £0.6 billion.

Some good news on non-EU goods exports with the figures showing them up 47% in 2013 Q1 compared with pre-recession.

Also a positive story on the sector front, with the data today showing the value of automotive exports at its highest since at least 1998 (when the data series starts).

And I know it’s Friday so those in need of more sector facts, hold on a while longer as we’ll have the regular Sector Friday blog today too…

This week the focus for Sector Friday is motor vehicles. The sector is made up of manufacturers of motor vehicles for transporting passengers or freight, this includes passenger cars, buses, street sweepers, vans and makes up 69% of the sector.  The manufacture of various parts and accessories, e.g. engines, brakes, gearboxes, catalytic convertors, and the manufacture of trailers and semi-trailers and caravans is also included and is the remaining 31% of the sector.

About the sector  

• The sector employs 129,000 people across 2,703 firms.
• It’s estimated that every job in UK vehicle assembly supports 7.5 elsewhere in the economy.
• Nearly £30bn worth of output was exported in 2011, accounting for nearly 12% of total manufacturing exports.
• R&D spend grew by 23% in the sector between 2010 and 2011 and the accounted for a third of the increase in overall R&D spend in manufacturing.
• The sector accounts for 5% of total manufacturing output.

Production

In 2012, the UK produced 1.58m vehicles (cars and commercial vehicles), up 7.7% on 2011, as well as 2.5m engines (-0.3% on 2011). In comparison, vehicle production in 1998 stood at 1.98m. The UK accounted for 1.8% of worldwide vehicle volume in 2011; in 1998 this was 3.7%.

Production levels placed the UK at 14th (out of 40 International Organization of Motor Vehicle Manufacturers country members) for total vehicle volumes, 13th for car production and 21st for commercial vehicle production in 2011.

There are:

7 volume manufacturers,

8 commercial vehicle manufacturers,

11 bus and coach manufacturers,

10+ niche and specialist manufacturers,

2000+ suppliers, and

8 F1 teams in the UK.

A lot of the industry is centred around the West Midlands and NE but there are also significant production facilities in the NW and SE.

Foreign ownership

Foreign ownership has long been a feature of automotive companies based in the UK – in 1952 Ford and GM had a share of nearly a third of the British market. The volume car manufacturers producing in the UK are all foreign-owned, but have chosen to produce in the UK because of high productivity levels, a skilled workforce and availability of high quality suppliers.  2012 saw numerous and considerable investment announcements from these OEMs, despite a weak and uncertain European outlook, further boosting the UK automotive industry as a whole and providing opportunities and confidence for supply chains.

Export focused

83% of UK produced cars, 57% of CVs and 62% of engines, are exported.  The largest 5 export destinations by value in 2011 were the US, Germany, China, Belgium, France. The exposure of the sector to markets outside of Europe are holding it in good stead, around 45% of UK exports are to EU countries, compared with 70-90% for Italy, France and Spain. Growth in exports of motor vehicles has been strong, and non-EU exports have risen by nearly 90% in the ten years to 2012 and exports of cars have increased from 65%-80%+ in the same period.

Future of the sector

Vehicle production in the UK is estimated to increase by 9% p.a. to 2.2m in 2016 and PwC estimate that supplier opportunity in UK market set to increase to £21.5bn in 2016 from £11bn in 2012.

Emerging economies, especially China, India and Mexico, will provide the main growth area for manufacturers, with limited growth in Europe. Overcapacity in the European market remains as a risk, but hopefully the mix of export destinations will continue to serve the UK sector well.

OEMs will be looking towards the needs and wants of these emerging economies as they will be providing demand, and will produce and adapt models to suit. The move to low carbon vehicles is also a big area, the UK government has committed over £450 million towards putting the UK at the forefront of the development, demonstration, manufacture and use of ultra-low carbon vehicles. Producers must also adapt to regulatory pressures such as lowering emissions and reducing engine noise.

Last week Citi published a briefing entitled “Why is investment so weak?” and goes through some of the facts and figures underlying the current underperforming investment picture. A few of the points made relate back to our own report and survey on the subject, Invest for Growth, published back at the beginning of March.

The Citi briefing makes a clear point that the tax landscape is not encouraging companies to invest, with the cutbacks to capital allowances in previous budgets and, despite the continual cutting of the UK’s headline corporation rate, the effective marginal tax rate has not fallen. I know this is something close to the heart of my colleague Andrew Johnson, and he blogged about this in November last year, ahead of the Autumn Statement.

Our own survey showed that out of all the tax system policy levers the government could pull, 28% of companies said that higher capital allowances would have the biggest positive impact on their investment in the UK. This was particularly important for small and medium sized firms. The recent increase in the Annual Investment Allowance is a move in the right direction yet internationally the tax environment continues to change as countries seek to improve the efficiency of their tax system, and the UK needs to ensure it remains competitive and predictable in the long-term. An EEF member, Stuart Fell, told us about his view as an SME in a guest blog at the end of 2012.

34% of manufacturers said a change to the tax system would have the biggest positive impact on investment in the UK

60% said a change to the tax system was among the top three changes that would positively impact investment in the UK

The Citi briefing also looks at investment intentions and makes the point it is often hard to distinguish whether these investment objectives are planned in the UK or overseas. Of the manufacturers we surveyed, over two-fifths have some production overseas, up from one-third in 2009. Our survey also showed that decisions on where to locate investment can be finely balanced and will be influenced by a range of factors relating to the business environment and what the business is trying to achieve. We asked companies about the balance of investment in the UK compared with overseas.

The data showed an overall shift in preference towards more overseas investment in the next three years compared to the last three years. Of those manufacturers with some of their production located overseas: 

• Around 80% had made some investment overseas in the past three years and a similar proportion is planning overseas investment in the next three years.
• One third said they invested more overseas than in the UK in the past three years and this is expected to slightly decrease in the next three years, with 30% planning to invest relatively more overseas in the next three years.
• Looking to the UK’s investment position in the next three years, fewer companies are planning to invest more in the UK than overseas compared to the past three years. And the proportion of companies investing only in the UK will remain approximately the same at 20%.

Investment overseas is not restricted to companies with operations abroad; some companies with no production outside the UK are also looking at overseas investment opportunities. Some 15% are looking to invest overseas in the next three years for the first time. Of these companies, almost half are planning to invest more overseas than in the UK which is not surprising as a first foreign investment is likely to be a significant undertaking.

 The Citi paper also makes the point that “the relative cost of capital has risen, in contrast to the pre-crisis trend, encouraging firms to expand via jobs rather than investment”. Making new investment in capital equipment is critical to manufacturers achieving their objectives and staying ahead of the competition. Half of companies in our survey report increasing their investment on capital equipment in the past three years, a reasonably consistent picture across all sizes of company, and just over a tenth report decreasing investment.

Looking ahead, manufacturers are also, on balance, planning to increase investment in capital equipment over the next three years; 45% of companies expect investment to increase with one in ten planning to scale it back. This pattern is again consistent across all sizes of company but firms in the transport and machinery sectors are most upbeat about future investment plans.

Following on from the post earlier this morning, the Executive Survey 2013 also asked about manufacturers’ predictions of their own performance this year.

Overall, there appears to be some confidence that they will see some growth across key business indicators in 2013. A balance of companies is predicting growth in all the indicators shown in the chart below, with the exception of temporary employees.

Productivity improvements are set to remain a priority in 2013 as over 90% expect to see productivity levels remain the same or improve in the next 12 months. Manufacturers must maintain a continual focus on productivity and efficiency in order to remain competitive both in home markets and overseas. There is a fairly consistent picture across firms of all sizes and in all sectors on this area.

However, there is considerably less size and sector consistency across other indicators:

• small companies are more optimistic about securing growth in new orders this year in both UK and export sales
• smaller companies in particular are predicting an improvement in order book visibility
• whilst all sectors post positive balances on the outlook for export sales, companies in the electrical and optical, and rubber and chemicals sectors were most likely to report expectations of significant growth in overseas demand
• metals and mechanical equipment have more subdued projections for growth both in UK markets and internationally

Finally, mixed fortunes at home and abroad will inevitably impact on demand for labour and responses indicate that we are likely to see further recruitment activity across the sector this year. Transport equipment and rubber and chemicals companies are set to be moving ahead with headcount expansion this year.

While the economic environment for manufacturers looks no less challenging this year than it was in 2012, it is encouraging that many companies remain confident that they can continue to grow their sales and drive through productivity improvements in the coming year.

Blogs later this week will look in more detail at the markets and strategies that will help to support this growth and some of the factors that could knock manufacturers’ growth plans off track.

Today we have published our second annual Executive Survey – a survey of senior executives discussing the year ahead, from views on the economic outlook to growth prospects and challenges.

Broadly, the survey shows that manufacturers are less downbeat about the prospects for the UK and industry in the year ahead with manufacturing leaders indicating a ‘steady as she goes’ outlook.

2012 Review

Before we look at how 2013 is expected to play out, let’s quickly look at what happened in 2012 and how that matched manufacturers’ expectations in the same survey a year ago.

At the start of 2012, manufacturers were more pessimistic about the outlook for the UK economy and manufacturing than economists. They were right to be – growth faltered at the beginning of the year and GDP looks set for a mild contraction across the year as a whole.

However, the economic news was not entirely gloomy last year. Employment across the economy and in manufacturing increased; there was some solid export growth to markets outside Europe; and we saw a small pick-up in business investment. All as predicted at the start of the year by manufcaturers – see below.

So what about this year?

Back to the here and now - our latest survey shows that manufacturers are expecting the picture in 2013 to be a little better, with 30% of respondents expecting an improvement against 23% anticipating a further deterioration in overall economic conditions. And for conditions in manufacturing, the same proportion of respondents (30%) expect a deterioration as an improvement in trading conditions this year. 

Variation in sector performance to continue

The uncertainties are weighing more heavily on some sectors than others. Companies in the metals sectors are the most negative about industry growth prospects in 2013, with a balance of 13% of companies expecting conditions in the sector to deteriorate this year; mechanical equipment is also gloomy about the 2013 outlook.

Some sectors are more upbeat; the transport sectors, in particular, are forecasting a moderate improvement in the outlook. Companies in the rubber, plastics and chemicals sectors are also, on balance, predicting a pick-up in trading conditions this year.

Be sure to come back later today when I'll blog again on how manufacturers expect key business indicators such as employment, sales and profits to turn out in 2013.

Trade statistics have been published today with some positive movements in numbers in Q3 after the numbers in Q2 showed the overall trade deficit increasing.

Overall, the UK deficit in goods in 2012Q3 was down £2.7bn on the quarter at £25.4bn compared with a deficit of £28.1bn in Q2. Goods exports were up 2.6% on the quarter with goods imports down 0.7%.

Manufacturing had a pretty good month in September too driven by buoyant sales of chemicals to Europe and continued growth in capital goods exports to non-EU markets.

Both EU and non-EU good exports were also up on the quarter at 2.2% for EU and 3% for non-EU. As usual there is a varied picture looking at individual markets; exports to France and the US increased again after a fall in Q2 and goods exports to China have grown in four out of the past five quarter.

Back in August, we said that 2012Q3 will need to see a bounce back after Q2 so positive news that this has happened given the goal of doubling exports to £1 trillion by 2020.

That said, more export driven growth is what our economy really needs at the moment – a job made more difficult by continuing problems in Europe. The Chancellor’s Autumn statement in a few weeks time needs to focus minds across all government departments on growing the number of companies investing and exporting in the UK.

On a side note... UKTI has recently launched a new website, Open to Export, providing a digital community for SMEs wanting to access export related guidance, support and tips. Businesses can ask questions with experts, service providers and peers providing advice and information as well as accessing articles on markets and viewing current opportunities. A useful online avenue of support and help for businesses wanting to grow by exporting.

I blogged earlier on this week about how manufacturers were somewhat gloomy about growth for the UK economy and even about their own industry’s prospects in the year ahead.

However, manufacturers are more likely to be taking a ‘glass-half-full view’ of their own company’s prospects.

Companies remain confident about their performance in export markets, with over four fifths expecting sales to be the same or greater in 2012 compared with last year and response balances are positive across all manufacturing sectors.

Responses on likely sales in the UK market are also broadly positive, especially among SMEs.

The outlook for recruitment, while positive overall for both temporary and permanent employees, is skewed towards large and small firms respectively. The main sectors likely to see growth in permanent employment are mechanical and transport sectors.

This tallies with recent reports of significant investment commitments from companies in these industries and the likely associated benefits through the supply chain. Whilst the intent to recruit is there, we will have to see whether firms are able to attract and retain the skills they need.

If there is a weak point to executives’ expectations on firm-level performance it is around profitability. Across all companies, 35% of manufacturers expect an improvement in profit margins compared with 31% predicting a further squeeze in 2012.

Last week Felicity examined the Guardian’s infographic on export growth in 2011 and discussed the possible performance of exports in 2012.

In our Executive Survey 2012 report, companies say that exports will be central to their growth prospects this year and report that they are hunting out new, global markets for their products and services to take advantage of opportunities. Nearly half of firms in our survey say that increasing demand for products in emerging markets will be an area of growth for them in the year ahead.

Through the recovery, economies in Asia, the Middle East and South America have played a big part of the UK export growth and especially in manufacturing. In the year to October 2011 goods exports to non-EU markets were up 20%.

Broadly, the US and Germany have a greater orientation towards BRIC markets than the UK. However the UK performs well in certain emerging markets and niches; Russia is a more important market for UK manufacturers than US ones and a greater share of the UK machinery and transport sector exports head to India than is the case for either German or US manufacturers.

And whilst exports from the UK to the BRIC economies have grown considerably during the ten years to 2010, this growth is coming from a low base – just 6.8% of the UK’s total manufactured goods exports are destined for the BRICs. The chance for further gains cannot be ignored. Emerging economies are set this year to reach the milestone of importing more than developed economies.

But it’s not just products that will be a growth generating avenue this year, just under a half of firms saying that increasing demand for services in new markets will be an area for growth.

Services can add precious value to production activities and have provided an important income buffer for manufacturers in recession and times of weak order books. Previous EEF research has shown that, on average, manufacturers derive around 12% of their turnover from services but most companies only provide services in the home or near export markets so the opportunity is there for the taking. Large companies in our survey particularly cited this as an opportunity for them – 60% compared with 45% of SMEs.

Whilst the outlook for domestic and near export markets looks less than inviting, this does not mean that opportunities are not out there for manufacturers in these markets. The changing preferences of consumers, whether trading down to lower cost products or trying to save cost, energy and other commodities through energy-efficient and low carbon goods, is there to take advantage of.

Companies also say that there are opportunities for manufacturers to diversify by entering new supply chains. Just over a third of executives responded as such in our survey, a number remaining fairly consistent across all industry sectors.

Whilst a considerable number of manufacturers found them hit by disruptions to industry during 2011, from the Japanese earthquake and tsunami to the Thai floods, many firms also found themselves benefiting, picking up orders from disrupted suppliers. And as companies try to mitigate the risks of future disruption by dual sourcing, the opportunity presents itself for UK firms.

We will have a look later this week at how companies expect these growth opportunities to help their firm level performance and any risks companies are planning for that might upset growth.