The Lloyds Bank UK International Trade Index seeks to help UK companies become more successful, by providing them with insight into key challenges and opportunities when trading internationally. Based on the opinions and experiences of some 1,300 UK businesses, it’s produced in partnership with intelligence firm IHS Markit.
The UK remains the world’s tenth biggest exporter and its fifth biggest importer. Success when trading internationally in 2019 could be more important than ever for more UK businesses and the UK economy. Post-Brexit, the challenges for UK businesses trading internationally could be greater, but ultimately – so could the rewards. So, what can your business learn from the January 2019 edition of the index (Q4 2018)?
Although new export orders for UK manufacturers increased in Q4 2018, the rate of growth was slower and it was significantly less than when it peaked in Q3 2017. Until Q4 2018, UK manufacturing had experienced its longest period of export growth since 2008.
Together with automotive sector regulatory changes, they have helped to bring about the near stalling of export orders reported by many manufacturers in Q4 2018. Transport and "intermediate goods" (especially basic metals) were among the sectors worst affected.
Larger firms with more diverse overseas export markets weathered the storm better than SMEs in Q4 2018. Although the number of UK companies exporting has increased consistently since the global financial crisis, the proportion of smaller companies exporting has reduced since the historic highs reached in early 2018.
In fact, they accelerated in Q4 2018. British exporters of consumer goods have performed better than expected for the past two years, partly fuelled by stronger labour market conditions and rising household incomes in emerging markets. There was solid growth in UK food, drink and leisure good export sales in Q4 2018, which suggests an ongoing opportunity for British exporters in 2019.
UK service exports fell in Q4 2018 for the first time in four years. Reasons for a fall in demand from European clients were thought to include UK domestic political uncertainty and slower economic growth in the euro area. The finance and technology sub-sectors are strong exporters historically, however, these too declined in Q4 2018.
While the UK has a long history of international trade, never have the challenges and opportunities of exporting been more important for British businesses. In 2017 the UK was the sixth largest exporter of goods and services in the world. With the release of the government’s export strategy last year the ambition was set to grow exports as a percentage of GDP from 30% to 35%.
Efforts to expand into new markets outside of the EU, particularly Asia Pacific and the Persian Gulf, helped the UK B2B service sector to continue to grow its exports in Q4 2018. Both regions could provide good opportunities for UK-based exporters of B2B services in 2019 and beyond.
UK businesses still reported supply bottlenecks in Q4 2018. Stockpiling has led to shortages of transportation capacity, with UK companies continuing to stockpile at one of the fastest rates on record, adding to cash flow pressures in the year ahead for UK companies.
Of the largest overseas markets for British exporters, there was softer growth in China, France and Germany in Q4 2018. However, there was a solid upturn in the USA, while demand for UK products also strengthened in South Korea, Japan, Singapore and Australia.
Weaker demand in Germany and France meant that growth across EU markets as a whole was at its lowest since Q3 2013. That said, export growth to the Netherlands and Ireland were particularly good, with Spain remaining among the UK’s fastest growing key euro area export markets.
Scotland’s exports grew by 6.3% (or £29.59bn) p.a. while the Midlands (6.1%) also enjoyed excellent growth. It was more modest in the South of England (3.8%), Wales (3%), London (2.2%) and North of England (2.1%), and much less than encouraging in Northern Ireland (0.2%) and the East of England (-1%).
The Lloyds Bank International Trade Portal can help you better understand overseas markets. Our trade specialists are also on hand to support you. And whether you’re selling at home or overseas, we provide a range of commercial banking solutions for UK businesses to help keep your cash flow healthy.
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