United Kingdom

UK exports lag behind rivals amid Brexit and Covid uncertainty

Today News || UK News

UK goods exports have lagged behind peer countries this year in both the EU and other significant markets across the world, according to Financial Times research that highlights the scale of the challenge facing Britain as it seeks post-Brexit trade deals.

For example, during the six months to October, Italy became a larger exporter of goods to the US than Britain for the first time since records began in 1980.

The UK is recording falling market shares in goods exports in many key destinations amid the coronavirus crisis, according to the FT analysis of national trade data.

In the EU as well as nations including China, the US, Japan and India, Britain’s goods exports have been underperforming some peer countries in the six months to October compared to the same period last year.

Ads

It comes as the UK seeks to finalise a free trade agreement with the EU before Britain fully leaves the bloc on December 31, in order to avoid tariffs on goods and minimise border disruption, although both sides have warned of the risk of a no-deal Brexit.

At the same time, Britain is pushing to strike trade deals with countries covered by EU agreements that will no longer apply to the UK from January 1. Most have been finalised.

The UK exported goods worth £250bn excluding precious metals in the 10 months to October, down 17 per cent compared to the same period last year, according to data from the Office for National Statistics.

RELATED:  ‘Take Back Our Buses’ campaign calls for regional public transport reform

In November, far more UK exporters were reporting deteriorating competitive positions than those recording improvements, in both the EU and markets outside the bloc, a survey by the European Commission found.

Michael Gasiorek, professor of economics at the University of Sussex and director of the UK Trade Policy Observatory, an expert group, said it “did not surprise” him that Britain was recording falling market shares in exports of goods by certain industries, both to the EU and countries outside the bloc. “There is clearly nervousness of buying in the UK,” he added.

In EU markets “there is some incentive not to buy in the UK” given the lack of clarity about pricing and regulations after the Brexit transition period ends on December 31, said Mr Gasiorek.

In markets outside the EU, there was “high uncertainty” about buying in the UK, particularly for those countries that have trade agreements with the bloc and could see the terms of commerce with Britain change at the end of the transition period, he added.

The stakes from January 1 are high in UK industries such as car making, which is one of Britain’s significant exports and faces a 10 per cent tariff for vehicles going to the EU if a trade deal is not finalised.

Thomas Pugh, economist at Capital Economics, a consultancy, said there would be disruption at the border even with a trade deal, and this would impact UK exports more than imports.

RELATED:  London walks: pangs of hunger in Notting Hill

“If there is a no deal [Brexit] then this disruption will be worse and last for longer and will have a bigger impact on trade flows,” he added.

The EU is the largest destination for UK goods exports, but imports by the bloc from Britain have dropped 16 per cent in the first 10 months of this year. This contrasts with how EU imports from China rose 3 per cent, and dropped by 13 per cent from the US.

The UK’s underperformance in goods exports is stark in the US, Britain’s largest single trading partner.

In the six months to October, US imports from the UK fell by almost 30 per cent, almost twice the drop recorded by Germany and Spain, and 9 percentage points more than the decline for Italy, according to American trade data.

Over that period, Italy sold goods to the US worth 2.5 per cent more than those exported by the UK.

Line chart of US goods imports from the UK/imports from Italy, rolling 6-month sum, ratio showing The US is importing more from Italy than the UK

A rebound in the Chinese economy after the first wave of the coronavirus pandemic has recently boosted EU goods exports, but this has not been the case for the UK.

In the six months to November, Germany and Italy on a combined basis exported $6bn more to China than in the same period last year: a 9 per cent increase. Chinese imports from the UK fell 18 per cent.

Line chart of Annual % change on rolling 6-month average showing China's goods imports from the UK are falling

German and Italian exports to India and Japan have also fallen less this year than those from the UK, according to the latest available data.

Strong demand for pharmaceutical products during the pandemic partially explains the UK’s underperformance in key destinations for goods. Germany is the world’s largest exporter of such products, with France and Italy both ahead of the UK, according to the International Trade Centre.

RELATED:  Williamson puts teachers in charge of GCSE and A-level grades

The UK’s weakness could also explained by how Britain is a leading manufacturer of aircraft components, and the sector has been hit hard by restrictions on travel during the pandemic.

Line chart of Chinese goods imports from Germany/ goods imports from the UK, rolling 6-month average, ratio showing Germany has increased its trade presence in China relative to the UK

The underperformance has exacerbated how the UK had smaller market shares in goods exports than some peer countries before the pandemic.

Britain’s market shares would be larger if services were included. The UK is the world’s second-largest exporter of services after the US.

But trade deals tend to focus on goods and any post-Brexit agreements secured by the UK are expected to give only a limited boost to British services.

Moreover, UK services exports “have been hindered by travel restrictions [during the pandemic] as much of services trade is historically done in-person”, said James Smith, economist at ING.

He added that despite the expected rebound in exports in 2021 as the pandemic wanes, “there is little doubt that the switch in trade terms [with the EU] at the start of next year will knock export flows, given the likelihood of longer transit times and higher costs”.

UK news Today Latest stories & updates More Headlines

Today News Post || UK News || World News || US Updates || Trending News || Technology News || EU News

Source

Tags
Show More

Related Articles

Back to top button
Close