New UK export business rose slightly for the first time in five months during January, the latest Purchasing Managers’ Index (PMI) showed.
The monthly survey from IHS Markit and the Chartered Institute of Procurement and Supply (CIPS) found stronger demand from the European Union, the US, China, Brazil and the Middle East and North Africa, while UK manufacturing output and employment also grew.
Duncan Brock, CIPS group director, said that moderate improvements in export orders had balanced out a weaker rise in domestic work, but noted persistent challenges for manufacturers.
“Supply lines remained unreliable for some essential goods and raw materials, stifling the capacity for businesses to complete work in-hand and hampering further productivity,” Brock said.
“Prices rose for another month and every month for the last two years as higher food, energy and material prices continue to act as a drag on business costs and recovery in the UK marketplace,” he added.
Mike Wilson, chief executive of Manchester-based consultancy Go Exporting, told Capital.com that the slow growth in exports was no surprise, given his current client feedback.
“Businesses are concerned by a raft of new rules and regulations which came into force on 1 January 2022, in particular the need to hold evidence to prove a product has UK origin and therefore qualifies for preferential duty under the terms of the UK-EU Trade & Cooperation Agreement when exported to the EU,” Wilson said, also citing additional new regulatory hoops.
Post-Brexit figures on trade with the EU, the UK’s biggest trading partner, have been complicated by the additional impacts of both the pandemic and supply chain issues.
Government research found UK exports to the EU fell by 14% year-on-year in 2020, the same percentage as its fall in exports to non-EU countries. The value of imports from the EU fell by 19%, versus 17% from the rest of the world.
Following the end of the withdrawal period at the end of 2020, UK-EU trade fell sharply in the first quarter of 2021, with exports to the EU down 18% and imports from the EU down 25%. While both have since risen – exports more significantly than imports – UK-EU trade remains below its pre-pandemic levels.
As the UK government attempts to shake off an ongoing political scandal over alleged parties held in Downing Street during national lockdowns – with Prime Minister Boris Johnson refusing to heed calls to resign – it will be looking to improve global trade figures with the EU and beyond this year, in a bid to demonstrate the benefits of Brexit.
Analysis from the Confederation of British Industry (CBI) called overall UK export growth in 2021 “disappointing” and said it expected the recovery in exports in 2022 to be “lacklustre”.
“Let us be candid: UK exports are being outpaced by our global peers which, if allowed to continue, will negatively impact our economy in the long term,” said CBI chief economist Rain Newton-Smith. “We must continue to address market access barriers globally while supporting all businesses to seek growth internationally.”
Newton-Smith said the government’s new export support service was a positive step, but called for more domestic R&D spending and the normalisation of relations with the EU, where relations have turned frosty and wrangling over the Northern Ireland protocol continues.
The CBI has also called for an expansion of export finance and the use of ‘export champions’ to inspire businesses, especially SMEs. It says fewer than 10% of UK businesses currently sell overseas, with exports totalling around 27% of GDP, versus 43% in Germany.
Josie Dent, managing economist at London’s Centre for Economics and Business Research (CEBR), said she was expecting an improvement in UK export prospects for the coming year.
“Supply chain issues continue to weigh on trade prospects, but there are early signs that the worst of the disruption is behind us. Most countries, with the notable exception of China, have abandoned ‘zero Covid’ strategies, making a return of full-scale, lengthy lockdowns which disrupt supply chains less likely,” she told Capital.com.
“Post-Brexit trade arrangements continue to pose a downside risk for the UK economy, therefore establishing and maintaining good trading relationships will also be important this year,” Dent said.
The CEBR forecasts that exports declined by 1.5% last year, but will rebound by 4.8% in 2022.