UK trade – more exports going to fast-growing markets

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Earlier this week the manufacturing PMI showed a pickup in export orders, and today’s UK trade data suggests that manufacturing exports finished 2014 on a positive note.

 

The UK's trade in goods deficit narrowed by £2.2 billion to £29.4 billion between the third and fourth quarters of 2014. This was due to an increase in exports of £2.0bn to £73.8bn, and ONS attribute this to increases in exports of manufactured goods. This is much-needed good news on exports as – after strong growth in 2010 – challenges in some of the UK’s key markets, most notably Europe, translated into a decidedly flat picture since 2011.

Exports (value, £mn)

export1   

Source: ONS, 2014

 

But this flat picture masks the underlying stories. While export growth to traditional markets has been poor, manufacturers have been working successfully to develop new products and services to capture opportunities in new markets, and the share of goods exports to emerging markets has risen steadily. For a start, it is certainly no longer the case that we export more goods to Ireland than the BRIC economies. Actually, in 2014 we exported nearly as much to India and China alone.

Exports (value, £mn)

export2
Source: ONS, 2014

 

And while it is the case that the UK exports less to some of the BRIC economies than some of our competitors do, the picture changes quite notably when we consider other emerging and fast growing markets.

For example – as a percentage of total exports – the UK exports more than Germany does to some Middle Eastern countries including the UAE and Saudi Arabia as well as high-growth Asian economies such as South Korea and Singapore.

% of total exports in 2013
export3
Source: ONS, 2014 and Statistisches Bundesamt (Federal Statistical Office), Wiesbaden 2014

 

In addition, some sectors are more successful at exporting to emerging economies than others: for example, while 4.3% of total UK exports go to China this figure rises to 10.3% for the automotive sector. Similarly, while 1.1% of total UK exports go to Saudi Arabia, this rises to 4.3% for the aerospace industry.

All of this builds a pretty positive overall picture for exports to high growth markets. When we look at the total share of UK exports going to our top 20 emerging and high growth markets (I’ve excluded all of Europe, the US, Japan, Australia and Canada) this has risen steadily. It was rising before the recession and it’s still rising now. The share of exports going to these markets jumped from 19% in 2013 to 21% in 2014.

% of UK goods exports going to top 20 emerging and high growth markets
export4
Source: ONS, 2014


This is good news, because a diversity of export markets provides more opportunities for growth and creates resilience against economic shocks. Maintaining this growth won't be easy – our competitors will also be looking to grow exports to these markets for a start – but if we want the UK’s export position to improve, this is a trend we need to see continue. As a result, this is an indicator we’ll be watching closely on this blog.

 

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