Continuing our blogs on manufacturers' outlook for the year ahead, today the focus is on exports and the prospects for growth in international markets.
Over 20% of manufacturing output is directly exported
What happens beyond the UK is particularly important for manufacturers as they are more likely to be exporters than firms in other sectors of the economy and just over £1 in every £5 produced by UK factories is directly exported.
55% of manufacturers expect export sales to grow in 2014
Exporters had a challenging 2013; we should see manufactured exports for 2013 as a whole expand by around 3%, around twice the rate of growth in total exports but the pace of growth has clearly slipped from just a few years ago.
Our Executive Survey suggests prospects look stronger for UK exports in 2014.
- 55% of manufacturers expect export sales to increase
- Of which, 8% are planning for growth to be significant
- All sectors are, on balance, positive about likely export sales in the year ahead with electronics and machinery the most upbeat
- All sizes of companies are looking to exports to support growth this year
One in eight manufacturers expects to see significant growth from Asian markets
As we discussed yesterday, increasing sales to emerging markets top the list of priorities for deilvering growth this year. Since we've been running the annual Executive Survey we've seen an increase in the number of companies that are exporting to markets outside Europe for example, 60% of respondents sell to Asia, up from 56% a year ago and 51% export to the Middle East up from 44% in 2012.
It is also emerging markets that will deliver the best export growth prospects in the year ahead, with 59% of manufacturers expecting growth to come from Asian markets (12% expect growth to be significant) and just over half looking to Middle East markets for growth.
However, 2014 is not the year to write off opportunities in developed economies. The eurozone is not expected to be the drag on growth it was a year ago and US demand is seen as a growth opportunity too in the year ahead.
There is, therefore, a fairly upbeat assessment of likely growth from overseas markets in the year ahead. But the level of certainty around these forecasts is little difference from previous years. Growth from Europe could well disappoint as signs of recovery could evaporate; the US will need to face its fiscal decisions at some point this year and the major emerging power - China and India - have their own reform agendas to pursue. If world trade growth drops by just 0.5% this year, overall UK GDP would also be hit to the tune of 0.5% by the end of 2015.
As the first week of January is traditionally the time for a whole host of predictions for the year ahead, we've got one on exports - at the end of 2014 we will no longer be able to say that we export more the Ireland than to China - for manufactured goods at least.