What we need to know about the UK’s trading challenge
February 15, 2018
Every year for the past 20 years, the UK has bought more goods and services from overseas than we have managed to export ourselves. Since 1997, our average trade deficit has been over £31bn every year, the equivalent of more than £1,100 for every household in the UK. And as every householder would know, spending more than you earn is not a recipe for long term success.
In the UK, exports represent only 28% of GDP, putting us bottom of the list of comparable nations in the European Union. Germany scores best – its exports were worth 46% of its GDP – but Spain (32%), Italy (30%), and France (29%) are all ahead of the UK.
So we are punching below our weight in international markets.
Fortunately, this trade challenge is getting more focus now, more than at any other time I can remember. As we start to look at the future of UK trade after Brexit, a welcome spotlight has been shone on the importance of exports for our future prosperity.
This greater focus can be heard in meetings across Whitehall and in the private sector. All parts of the UK economy are talking with more energy about trade than before. Over the last couple of years we have been working with government departments, private businesses and other stakeholders on the ‘export challenge’ and what can be done. But rising to the challenge is not at all straightforward. In fact, it is not even clear what the root causes of our underperformance are. Here are some of the contrasting views I’ve heard over the past few months:
- “There are cultural reasons why we don’t export more. The UK business community doesn’t attach the same importance to exports as, for example, Germany.”
- “The UK government is not as effective as other governments in supporting UK companies, at home and abroad, in order to achieve their export ambitions.”
- “UK exports are constrained by structural factors, such as the strength of our industries and the depth of our supply chains.”
In the case of trade and exports, everyone has a point of view. Many of us are passionate about increasing UK exports, but our views are often formed via anecdotes – from talking to our colleagues, contacts or customers. But we have seen little independent evidence to conclude which of the above, if any, is the most significant factor. And in the absence of data, opinions breed like rabbits.
If we can’t agree on the root causes, how can we agree on the best solutions? This issue is too important for a ‘loudest hunch wins’ strategy. We need to ground the debate in data, so that decisions can be made based on a shared version of the truth.
So we’d like your help. We are using our Trade Matters website as a central hub for data, analysis and points of view about how to address our export challenge.
We are starting with a quick survey on barriers to exports, so we can start getting some data on what UK companies believe is stopping them from exporting more.
The export challenge is one we all have a stake in, whether you’re private sector or public sector, young or old, for or against Brexit. The UK as a whole will be better off if we can improve our export performance. So if yours is an exporting business, or you would like it to be, please take some time to fill in our survey to help shape future support*, and do of course get in touch if you would like to discuss any of these issues or add your voice to the debate.
*The results of this research will be shared with the Department for International Trade (DIT) to inform their approach to supporting businesses in increasing exports.