According to the latest official figures, the gap between UK exports and imports narrowed in August, with the Office for National Statistics (ONS) confirming that the UK’s trade deficit in goods and services had decreased from £3.1b ($4.9b) in July to £1.9b.
While on the surface the figures may seem positive, many analysts have expressed concern over the health of the Eurozone, and the impact that is having on UK exports. Some also attribute the narrowing of the trade deficit more to a fall in imports rather than a huge surge in exports, as many in the UK may have hoped.
So where do the most recent shifts fit in the story of trade to and from the UK? And, crucially, what does this mean for UK businesses?
The Long View
While the UK has some very reliable trade partners, including the US, Germany and France, the latest figures from HM Revenue and Customs show that some traditionally strong partners have gradually diminished, while others have slowly grown.
Historically, the European Union has dominated in both exports and as a source of imports, but gradually this trend is changing. Growth is increasingly being driven less by Britain’s traditional partners in Europe and other advanced economies around the world and more by emerging and developing nations.
New Partners
Richard Lowe, Head of Retail and Wholesale, Corporate Banking, Barclays, says that overall it has been an era of solid growth. “This is a story about increasing trade. We have not merely swapped one country out for another, but we have increased the number of countries with whom we do business and we have increased how much we trade with them. It always helps to have a range of different countries with different ideas to trade with. As a nation, you need choice and you do need multiple partners.”
For UK businesses, this change has meant looking beyond traditional markets and opening up trade with new high-growth areas.
Diversification
Britain’s wealth of trading partners is mirrored by a similar diversity of products the nation trades. So how will this change as Britain looks towards the future?
Lowe is equally confident about the impact that China will have on British trade: “It is a phenomenally huge market that is ripe for expansion,” he says.
The UK’s top 20 import countries remain very Euro-dominated, although China has been by far the strongest player in the top 20 in terms of its compound annual growth rate.
