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UK export growth outperforms EU counterparts

18 December 2017

- UK export growth reaches nine-month high –

- Overall pick-up in global economy driving demand in goods across Europe -

- Cheaper pound attracting overseas buyers and investors -

UK export growth continues to outperform the export growth of Europe’s other largest economies, according to the latest European Export Index by accountants and business advisers BDO LLP.

The UK’s Export Growth Index – which charts annual growth in total exports – has risen to 110.3 for the fourth quarter of this year, up from 107.9 the previous quarter. The latest reading marks a nine-month high for UK export growth, which is now well above the long-term growth rate of 100. UK exports grew 13% year-on-year in Q3 and this quarter’s report points to an improved performance.

In comparison with Europe’s other leading economies, the UK is on course to record the fastest rate of growth for its total exports. In France and Italy, export growth is set to accelerate. The countries have recorded rises in their respective export indices from 101.2 to 101.9 and 101.0 to 101.2 for this quarter. Meanwhile a slight slowdown is expected in Germany and Spain, which have recorded falls in their respective export indices from 102.4 to 101.7 and 103.0 to 100.8. Despite the mixed forecasts, all the economies are set to see above average export growth in the fourth quarter.

The positive performance of the economies shows that European exporters are benefiting from the pick-up in the global economy. The World Trade Organisation revised its forecast for the volume of world trade to grow by 3.6% in 2017, up from a previous estimate of 2.4%. The pick-up has been driven by the renewed growth in Asia and North America, where import demand has been rising.

Demand for UK exports in particular has been rising above the long-term trend ever since the British public voted to leave the European Union in June last year. The country’s exporters have been able to take advantage of the more competitive prices they can offer customers as a result of the fall in the value of sterling.

Due to the rising demand, UK exporters are becoming increasingly confident in the short term. BDO’s UK Export Inflation Index - which indicates the rate of year-on-year growth in export prices – has increased to 105.1 from 104.0 for the quarter. The rise suggests that UK exporters are pushing up the price of their goods, although higher input costs are also playing a role in this increase.

In addition to attracting more custom from overseas, the fall in the value of sterling is also attracting higher levels of foreign investment. Foreign direct investment in UK businesses has continued to rise and is set to eclipse £1.5 trillion this year. Despite the uncertainty regarding the UK’s future trade agreements, foreign investors clearly think the cheaper investment price is too good to pass up.

 Commenting on the findings, Peter Hemington, Partner, BDO LLP, said: 

“The confidence of our exporters is high as overseas interest continues to increase following last year’s referendum. However, this confidence could quickly disappear as Brexit negotiations continue and a clearer picture develops about our future trade agreements. The government needs to ensure open and simple access to the global markets otherwise it risks the growth of our exporters in the longer term.”

To download BDO’s New Economy report and find out more visit www.neweconomy.bdo.co.uk

- Ends –

 

Overview of the BDO indices:

An overview of the Export Performance Indices are provided in the table below, detailing figures for the last four quarters, to allow for comparison.

 

 

Country

Q4 2017

(figures for this report)

Q3

2017

Q2

2017

Q1

2017

BDO Export Growth Index

EU

98.8

96.7

93.2

107.8

UK

110.3

107.9

108.1

111.4

Germany

101.7

102.4

101.7

100.5

France

101.9

101.2

100.1

96.7

Spain

100.8

103.0

103.0

106.9

Italy

101.2

101.0

101.1

104.4

BDO Export Inflation Index

EU

105.3

107.6

121.3

129.7

UK

105.1

104.0

114.5

125.2

Germany

116.5

105.4

109.3

109.3

France

99.7

104.0

110.6

118.1

Spain

101.0

98.5

94.9

99.7

Italy

103.4

105.0

103.0

89.8

 

Note to editors:

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Our clients are Britain’s economic engine – ambitious, entrepreneurially-spirited and high growth businesses that fuel the economy.

We share our clients’ ambitions and their entrepreneurial mind-set. We have the right combination of global reach, integrity and expertise to help them succeed.

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Methodological notes

The BDO European Export Indices are prepared on behalf of BDO LLP by the Centre for Economics and Business Research ltd., a leading independent economics consultancy. Cebr has particular strengths in all forms of macroeconomic and market forecasting for the UK and European economies and in the use of business survey techniques.

The indices are calculated by combining a range of up-to-date business surveys and hard economic data, from a European and country-specific sources to ‘nowcast’ annual growth in the current quarter. Using surveyed data from sources including the European Commission, IFO, CBI, ISTAT & the Bank of England, as well as trade statistics from the UN and national statistical agencies, Cebr forecasts the level of annual growth in both total exports and export prices

The surveys and historic hard data are combined and correlated against a time series of trade data, individually for export growth and export price growth. Cebr then calculates the strength of the relationship between these variables and the dependent variable, respectively export growth and export price growth for each of the two indices. The variables are then weighted together based on their correlations and strength of relationship. Using this, Cebr nowcasts the current level of export prices and total value of exports in the current quarter. While there may be some data from months within the quarter of release, a nowcasting exercise is used to project whole quarter figures.

Once a quarterly figure has been calculated, the annual growth rate from the same quarter in the previous year is derived. Finally, the growth rate is scaled into an index with 100 as the average long-term growth trend of the country and 95 as the level dividing expansion from contraction.

The process is repeated for all of the five largest economies in Europe, and the combined European Union. Long-term growth, represented by a reading of 100 in the index, is calculated at a EU level for exports and at a national level for export prices.

The results are useful not only as snapshots of the current trends in the export markets of Europe’s largest economies, but also as indicators of turning points and leading indicators of growth.


Contacts

Alexander Dickie at Teneo Blue Rubicon on behalf of BDO LLP:

Mob: 07876 287318
Tel: 0207 260 2700
Email: bdo@teneobluerubicon.com