National export strategy needed to boost growth, says BCC

Thursday 10 January 2013

Manufacturing output rose in March

The volatility of recent trade figures suggests the UK still needs a coherent national export strategy, it has been suggested.

Figures from the Office for National Statistics reveal that the UK deficit in goods and services was £3.5 billion in November 2012, compared with £3.7 billion in October.

In the three months to November 2012, exports to the European Union fell 3.7 per cent year-on-year, but trade with the rest of the world rose by 6.8 per cent.

Commenting on the statistics, John Longworth, director general of the British Chambers of Commerce (BCC), said special factors such as the Olympic Games may have impacted on the UK's trade figures.

"Despite the slightly improved trade deficit seen in November, the figures suggest the external sector is still failing to provide any support to the recovery," he stated.

"The new data means the trade deficit was more than £7 billion in the first two months of the fourth quarter."

And with a turnaround in December looking unlikely, net trade may well act as a drag on gross domestic product growth in the final quarter of the year.

What should the government do?

Mr Longworth said that, over the coming months, the government must do more to put international trade at the top of its agenda.

"There is still a lot of pressure on exports due to weak domestic demand and soft global growth, so UK businesses need all the help they can get if they are to succeed in driving an export-led recovery," he stated.

"Expanding trade promotion budgets is a good start, but why not go even further and introduce an Export Voucher scheme to help businesses on the cusp of exporting, so they can expand their capabilities and tap into fast-growing markets abroad?"

Mr Longworth pointed to the BCC's latest economic survey, which revealed exports in the service sector have improved.

He said this is "encouraging", but must not be choked off by a lack of access to finance to fund growth."

Capitalising on trade opportunities

David Kern, chief economist at the BCC, noted that the November trade figures are slightly better than most analysts had predicted, and this is cause for some optimism.

However, he said the average deficit of £3 billion per month is "too large" and shows that little progress is being made in rebalancing Britain’s economy towards net exports.

This has to be the priority if the UK is to see a sustainable economic recovery, along with healthier levels of public debt.

Mr Kern said that by focusing their attention away from Europe and towards fast growing markets, UK businesses are adopting the right approach.

But to reduce the deficit further, the switch in trade away from the EU must be even faster, he claimed.

“The Chancellor announced in his Autumn Statement welcome measures to support exporting companies seeking to break into new markets," Mr Kern noted.

"These must be reinforced and implemented effectively, and should be part of a national strategy aimed at strengthening UK exports."

He said more action in areas such as trade finance, promotion, and insurance is needed, if companies are to have the right support to penetrate new and growing markets.

Posted by Dan Smith