Exports to emerging economies key to 2012 growth

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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.

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Senior Policy Researcher

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