UK export growth slows but new markets beckon

The strength of sterling coupled with the strife in the eurozone have created a tough trading environment for UK businesses selling overseas. Exports are up just 3.7% on the same period last year.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013
It’s pretty stormy on the export front, according the latest DHL/BCC Trade Confidence Index, (a survey of more than 1,000 exporters). Not only did growth tail off at the close of 2011, but the Index forecasts a bleak outlook for domestic and international trade activity in 2012.

Manufacturing has proved the most resilient industry, reporting a 2% increase in Q4 orders, up from a 2% decrease in Q3. UK widget-makers are also feeling more upbeat than they were in the middle of 2011. Their profitability confidence is up, with firms predicting a 36% increase in earnings, up from the 32% forecast in the previous three months.

Elsewhere in the exporting game, however, spirits are low. Six months into last year, 50% of firms felt confident of increasing profitability, but this falls to 48% in Q3, and now just 43% in the final quarter. Unsurprisingly then, the vast majority of UK exporters are looking to save any spare cash rather than investing in new plant and machinery (72% have frozen budgets) or training (only 12% are investing in skills). Many firms have also shelved any hiring plans, with just a fifth of exporters on the hunt for new staff.

So what’s eating away at UK export? Inflation remains a huge concern for exporting businesses, despite the recent 0.4% drop. And the cost of energy, fuel, and raw materials has been an ongoing cause of strife, not to mention volatility in the exchange rates - 37% of exporters are finding the strength of sterling a bother. Taxation has also been cited as a key barrier to growth. All in all, it’s a perfect storm.

It’s not all bad, however. As Phil Couchman, CEO of DHL Express UK and Ireland, points out: ‘Factors such as a flat base rate and government making the UK a leading offshore trading centre for the Renminbi could give UK businesses a competitive advantage.’

And there are a lot of clever businesses that are circumventing the currency issues by looking beyond the eurozone. Couchman says: ‘An increasing number of UK exporters are seeing flourishing e-commerce sales to the continent and further afield, specifically Australia – as disposable income and favourable exchange rates across the Pacific create inroads for British goods. With our pre-existing markets struggling, it’s essential that exporters set their sights on new faster-growing trade partners.’

So there are a few good news stories out there. Nevertheless, a little joy on the eurozone front would help matters enormously. Over to you, Merkozy et al…

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today