UK goods exports slump by £54bn and market share shrinks in Covid trade rout
8 March 2021 | Birmingham, UK
- Britain’s goods exports fell by £54bn (14.7%) in 2020 as Covid-19 convulsed global markets
- Key manufactures including cars, machinery and pharmaceuticals all slumped in global markets – but gold was an unlikely exception
- As some markets recovered, UK lost market share to other countries as productivity woes sapped competitiveness
The UK’s goods exports slumped by £54bn in 2020 and the country lost market share to competitors as Covid-19 hammered global trade, new analysis shows.
The findings, from Aston University’s Lloyd’s Banking Group Centre for Business Prosperity, show that Britain suffered a 14.7% fall in goods exports – one of the largest of any major country in 2020 – and also saw a slower recovery as other nations gobbled up market share in key export destinations.
Leading goods exports including cars, oil and gas, machinery and pharmaceuticals all tumbled as the pandemic battered economies worldwide and supply chains broke down.
And the impact would have been even worse without massive inflows and outflows of gold, as investors bought up the safe-haven asset.
The report’s authors, who analysed the latest available UN trade statistics, said the UK would need to make raising productivity its “central goal” to avoid further decline post-Brexit.
Jun Du, Professor of Economics at Aston Business School and Director of the Lloyd’s Centre for Business Prosperity, said:
“The fundamental causes of the UK’s dismal trade performance go beyond trade itself. Our analysis shows that long-term stagnation in productivity growth is the key reason for the subdued competitiveness of the UK economy.”
The researchers compared the impact of Covid-19 in 2020 with the effects seen during the recession that followed the financial crisis of 2008, finding that while the drop in GDP worldwide had been higher in 2020, trade had not been hit as hard.
This was explained, they said, by the fact that the pandemic and lockdown restrictions had affected different countries at different times, but also by the resilience of so-called “global value chains”, or trade networks.
But turning to the impact on UK goods exports specifically, they found that in nearly every global region, the UK’s top exports suffered sharp declines as coronavirus spread worldwide.
While there was a partial recovery in the third quarter of 2020, the UK was slower than most of its international competitors to take advantage of returning global demand. Over 2020 as a whole, it lost market share in most product categories in the US, Germany and China, the three major markets anaylsed. Beneficiaries included EU nations such as Spain, Italy and the Netherlands.
The only major exception was gold: the UK exported $3.8bn worth of the precious metal in 2020, a 16% increase year-on-year. It also imported $8.8bn, a 33% rise. This is mainly explained by flows between the UK and Switzerland. Switzerland is a major gold refining and transit centre, while London is a storage and trading hub for international investors.
Some smaller industries also saw a rise in exports last year despite Covid-19, including ship and boat-building.
Goods exports made up 53.7% of UK exports in 2019, the last full year for which goods and services export data are available.
Professor Du added:
“Particularly now that it’s outside the EU, the UK needs to punch above its weight in new industrial and technological fields, as well as in new markets.
“It can only do this by finally getting to grips with its longstanding productivity problem, because low productivity in trade terms effectively means that our production costs are higher, so our exports are less competitive.
“Higher productivity must become a central goal. There is a virtuous circle between innovation, productivity and exporting, which we must exploit to the full to regain international competitiveness.”
The report includes a number of recommendations for boosting productivity, including a more joined-up approach to industrial policy, innovation, skills, and trade and investment initiatives. It also calls for greater investment in public R&D and more use of intelligence around emerging trends to act as an ‘anemometer’ for policymakers and firms.
Co-author Dr Oleksandr Shepotylo, added that while government policy could create a framework for addressing productivity challenges, individual firms also needed to pay closer attention in order to reap the potential rewards. He said:
“The smartest firms can use the ‘quantum leap’ in digitalization and new ways of working engendered by the Covidexperience to become forward-looking when it comes to the future technologies, skills requisites, managementcapability and training needs that trading success depends on.”
ENDS
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Notes to Editors
Research
The full research paper, Covid-19 and UK Trade, is available for download here or in PDF format on request from James Tout (details below).
About Aston University
Founded in 1895 and a University since 1966, Aston is a long established university led by its three main beneficiaries – students, business and the professions, and our region and society. Aston University is located in Birmingham and at the heart of a vibrant city and the campus houses all the university’s academic, social and accommodation facilities for our students. Professor Alec Cameron is the Vice Chancellor & Chief Executive.
For media inquiries in relation to this release, call James Tout on 07989 610 276 or email [email protected]
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