Making the UK a More Effective Trader

The Stream consists of an overall review of UK exporting taking stock of existing knowledge and identifying gaps that require further research, and a number of empirical analyses focusing on intermittent exporters, impact of globalisation on trade and industrial transformation at local level, productivity and export across countries, as well as associated issues on finance.

Overall aim:

 
  • To understand recent trade patterns in Britain and the world, and the factors that impact on the trade effectiveness of the British economy.
  • Do so by building robust evidence base of the trade patterns and their determinants at firm, industry, regional, and global level.
  • To contribute to policy debates on trade issues and strategy-making processes to promote trade effectiveness at the UK local, national governments and business sectors drawing on the evidence from our research.

Projects

S1.1 White Paper 1: UK Trade in the New Globalised World

Researchers: Agelos Delis, Mustapha Douch, Jun Du (Lead), Christos Ioannidis, Sandra L. Torres and Enrico Vanino.

State of the art on international trade and its drivers at both the aggregate and firm levels, by reviewing the literature and evaluating the UK’s position in the Global Value Chains (GVCs). It identifies what it is that we need to know about UK trade, but do not yet know, guide the prioritisation of the research agenda on the UK trade and productivity issues.

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S1.2 Research Project: On the Determination of Sectoral UK Exports

Researchers: Agelos Delis (Lead), Christos Ioanidis and Michalis Stamatogiannis

This project analyses the evolution and determination of UK exports in the ten major sectors over the period 1962 – 2016, by estimating the export sensitivity to fluctuations in the real exchange rate and in world trend and cyclical income.

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The revised version of the paper employs more recent and more frequent data, using monthly observations from ONS for the period January 1998 to January 2020. We consider two export destinations EU and non-EU. Implementing the MM method, we estimate exchange rate and income elasticities of exports for several UK Sectors. We find that both UK sectoral export elasticities are smaller for the EU markets compared to non-EU. Sector specific elasticities vary, but their patterns are qualitatively similar across destinations. UK Sectors participating intensively in Global Value Chains (GVCs) have much lower responsiveness of their exports to changes in foreign demand, but higher with respect to changes in the exchange rate.

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S1.3 Research Project: Defying Gravity? Policy Uncertainty and Trade Diversion

Researchers: Mustapha Douch, Jun Du (Lead) and Enrico Vanino

This project investigates the effects of trade policy uncertainty on firm export margins and trade diversion, exploiting the Brexit process as a natural experiment and using the UK’s transaction-level trade in goods data.

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S1.4 Research Project: Export Strategies for High Performance

Researchers: Jun Du (Lead), Mustapha Douch, Steve Roper (ERC), Arash Sadegh

This project investigates the link between internationalisation strategies of firms and the effect on their business growth and profitability, based on UK trade transaction compiled by the HMRC and PAYE data. This is a collaborative research with Enterprise Research Centre (ERC).

S1.5 The International Servitization of the UK Producers

Researchers: Mustapha Douch and Jun Du (Lead)

The UK is the second largest service market in the world and remains the second cross-border service provider behind the US. However, the global competition has grown fierce.

Today, services are increasingly crucial to manufacturing firms. This project will build a comprehensive review on the state of the art and in-depth analysis of the links between firm productivity, global value chains position and service trade in the UK manufacturing sectors.

S1.6 Non-tariff Barriers and the UK Trade

Researchers: Jun Du, Mustapha Douch, Oleksandr Shepotylo (Lead)

Stepping out from the EU implies the UK’s retreat from the previous advantageous trade arrangements with no tariffs and minimised non-tariff trade measures (NTMs). The changes to these conditions mean likely higher trade costs and disrupted business value chains across borders. Therefore, firms’ productivity will be affected as a result in the short term and possibly also in the long-term.

This project examines the impact of non-tariff trade measures (NTMs) on productivity. It involves first quantifying the NTMs, and then exploring their determinants, and analysing the impact of NTMs through potential Brexit scenarios (customs union, FTA, hard Brexit) on productivity and trade of firms in the UK using Annual Business Survey data.

S1.7 COVID-19 Pandemic and Global Value Chains

Researchers: Agelos Delis, Mustapha Douch, Jun Du and Oleksandr Shepotylo

This project aims to understand the impact of COVID-19 pandemic on the global trade and value chains. We start from where the pandemic initiated to where it transmits to. Using up-to-date data, we quantify the disruption, examine its transmission and look beyond it for implications for the UK.

We develop an insight paper, and contribute an article to the Conversation, entitled ‘Coronavirus won’t kill globalisation – but a shakeup is inevitable’, also published in the World Economic Forum ‘Lessons from China: This is how COVID-19 could affect globalization’.

We also submitted written evidence to the Parliament’s inquiry and it has been adopted to the Parliament’s report ‘The COVID-19 pandemic and international trade’, published on 29 July 2020 by International Trade Committee.

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S1.8 UK Professional and Business Services (PBS) Sectors and their International Traders

Researchers: Jun Du, Mustapha Douch, Oleksandr Shepotylo and Uzoamaka Nduka

This project aims to understand the role of the UK’s Professional and Services sectors in the UK economy and the post-Brexit future their international traders face. We develop an insight paper and commentaries based on the written evidence submitted to the Parliament’s inquiry.

An insight paper is written about some facts found in this analysis, and a blog is published by the UK in Changing Europe.

A piece of written evidence was submitted for the Parliament Inquiry on European Union Committee: The future UK-EU relationship on the Professional and Business Services in June 2020. It has been adopted and published by the EU Services Sub-Committee October 2020.

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S1.12 UK Trade and Prosperity 2020 – Looking Beyond BREXIT and COVID

Researchers: Jun Du, Oleksandr Shepotylo, Meng Song and Xiaocan Yuan

This is the 2020 year-end report, finalising a series of research outputs from the Lloyds Banking Group Centre for Business Prosperity (LBGCBP) that covered skill challenges, productivity, and prosperity in the UK.

The purpose of this report is to review the long-term trend and current state of UK trade and productivity, and sketches a comprehensive overview of how UK trade has evolved during the Brexit transition and the COVID crisis. It offers policy implications on the ways forward and highlights pertinent questions for future research.

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S1.13 UK COVID-19 and UK Trade

Researchers: Jun Du and Oleksandr Shepotylo

This paper documents the unprecedented disruptions which affected UK trade during the COVID-19 pandemic in 2020. Overall UK exports contracted by 15% in 2020, while an international comparison depicts similar sharp declines among the UK’s peers, but the statistics suggest that UK had a deeper decline and slower recovery, compared with Germany, Italy, Spain and the US. Drawing on the most recent available monthly trade transactions between the UK and its trading partners up to September/October 2020, we make pioneering efforts to provide a comprehensive and in-depth analysis of the international trade dynamics of UK businesses.

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S1.14 Research Project: Feeding the Celtic Tiger – Brexit, Ireland and Services Trade

Researchers: Jun Du and Oleksandr Shepotylo

This project studies the impact of the 2016 Brexit Referendum on the services trade of the UK and Ireland. Using the synthetic control method, we show that in 2016-2019, on average, the UK has been losing 9.2% of services exports or 36.7 billion USD every year. This amounts to 146.8 billion USD between 2016-2019 in total. By contrast, Ireland is the big winner of Brexit. We show that, over the same period, Ireland on average has boosted its services exports by 23.6% or 41 billion USD every year, generating extra export value of 164.1 billion USD in total relative to the counterfactual scenario in which Brexit did not happen. In the longer term though, UK businesses will need to develop their real competitiveness to counterbalance the disadvantages brought by Brexit. Such competitive edge can be only be created by productivity and innovation.

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Productivity & Skills

Theoretically and empirically understanding the nature of the current skills problems of the UK by seeking systematic and robust evidence.

Research Areas

The Centre for Business Prosperity delivers world leading research in a multitude of different topics.