That the UK has a trade in goods deficit with the rest of the world, should not come as a surprise. Particularly for long time followers of stats to do with the state of the UK economy.
The government has set a target of increasing UK exports to £1 trillion by 2020 in an attempt to address this.
Getting more companies exporting is a useful rallying point for improving the underlying resilience of UK manufacturing. EEF's surveys have consistently shown that companies that export are more profitable, more innovative and more productive.
Food and drink – export intensity
Today we shine a light on the UK's largest manufacturing sub-sector, food and drink.
Looking across sectors we can see it is one of the weakest sectors when it comes to export intensity.
Just 10% of food and drink output is exported, a figure which does not live up to what we would expect from the largest manufacturing subsector.
Additionally, the balance of trade in goods for food and non-alcoholic drinks is in deficit (for two components of the sector – beer and spirits – there is a trade surplus).
Food and drink – trade deficit
As we've recently highlighted - UK manufacturing output puts us 7th in the world. So what does the food and drink balance of trade picture look like for the other top 10 countries?
Food and drink – what’s driving the trade deficit?
What’s driving this deficit? Turning to the sub-sectors of food and drink and looking over time – the thing that stands out the most is meat.
We just can’t stop importing it.
This has contributed to a steady increase in the meat and meat products trade deficit year on year.
Meanwhile Scotland’s spirits industry is the main saving grace (the other being beer).
Food and drink – fixing the trade deficit
What can be done to address this? Food is pretty personal, telling people they can’t have something (in my case halloumi) is a big no no.
But just because you were wondering, the value of meat imported to the UK was 35% higher per capita in 2014 than the EU average.
The best case scenario is to significantly boost the value of our food exports – moving the UK up the value chain. The share of each subsector’s exports is shown below in the exploded donut (how’s that for adding value?)
What the chart shows is that our key food and drink exports are high value spirits, along with other foods (prepared meals – tinned or canned, condiments and teas), meat/meat products and cheeses.
But how much of this is high value? For example there has been talk anecdotally of Britain exporting pigs to other countries in the EU who then smoke it (adding value) and we import it back – why don’t we just do it here?
This is certainly easier said than done – but if the UK trade balance is to be improved, we really need to tackle this at every level we can.
Could the 4th Industrial Revolution help?
A wealth of opportunity lies ahead for UK manufacturing – we are on the cusp of a global, technology-driven 4th industrial revolution (4IR). Technological advances will play to Britain’s strength and cement our position as a high value manufacturer.
Our ability to produce more bespoke products, deliver more rapid and cheaper prototyping and to collaborate ever-more closely with customers will further enhance our reputation for adding value and hopefully with it, the value of our food and drink exports.
What do you think? How can we boost the value of UK food and drink exports? Reply to us on Twitter.
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