EY ITEM Club Special Report on Exports
A time for the UK to go for growth
UK Export performance in summary
As the Prime Minister embarks on the latest trade mission to China, there’s no question that the UK urgently needs to revitalise growth in its exports. However, it’s equally clear that the global opportunity for UK exporters is huge – with a massive prize on offer if the UK can reverse several years of underperformance.
First the bad news. The UK’s export performance since 2008 has been disappointing, especially given the sterling’s sharp fall in 2008–09. With its productivity growth and wage costs lagging behind competitors such as the US and Germany, the UK has managed to achieve 17% growth in export volumes in the four years since Q2 2009.
That may not sound too bad – until you see that Germany’s exports grew by 34% over the same period. And the relatively poor performance of exports is one of the key reasons for the UK’s generally lacklustre growth, with GDP expanding just 0.1% in 2012 (although the pace has picked up in 2013).
The UK’s recent relatively poor showing in world trade reflects a number of structural shortcomings that damage competitiveness and hamper export growth. The government is already acting to address many of these issues – as demonstrated by its education reforms and the current mission to China.
Such actions need to form the catalyst for a concerted export drive by government and business. To date, the UK’s progress in penetrating fast-growing emerging markets has been comparatively slow. By harnessing these markets’ potential to buy British goods and services, the UK has the opportunity to raise its game and deliver a blistering export performance – in turn driving faster and more balanced growth in GDP.
Exports to China, 2000 vs. 2012 (% of total)
Source: EY ITEM Club
Relative unit labour costs with respect to the UK
Source: Source: ITEM/Haver Analytics