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UK export growth falls to lowest level since Brexit vote

24 September 2018

UK export growth falls for a sixth consecutive quarter and creeps closer to the point of contraction.
European export growth remains resilient in the face of rising global trade tensions.
The UK’s performance dips beneath that of Germany, France, Italy and Spain.

UK export growth has slowed significantly and was the worst performing of the largest five EU economies in the last quarter, according to the latest European Export Index by accountants and business advisers BDO LLP.

The latest findings from the quarterly index show that growth of UK exports has fallen for the sixth consecutive quarter. The UK’s Export Growth Index plummeted to 95.6 in Q3 2018 from 97.6 the previous quarter and is creeping closer to the point of contraction, below 95.0.

The index now sits at its lowest level since Q2 2016, when the UK voted to leave the EU, and marks a dramatic fall of 15.8 index points since Q1 2017.

The rising price of UK exports is contributing to this sluggish growth. The UK’s Export Inflation Index – which indicates the rate of year-on-year growth in export prices – has risen from 100.1 to 102.7 this quarter. Uncertainty around Brexit negotiations remains a significant factor in the dampened expectations of UK exporters, and rising prices are causing foreign customers to look elsewhere.    

This is typified by increasingly cautious announcements from the UK’s largest export goods industry, car manufacturers. BMW plans to shut its plant for a month after Britain leaves the EU, while Jaguar Land Rover has moved 2,000 employees to a three-day week until Christmas, citing Brexit uncertainty and the sliding sales of diesel-powered cars.

By comparison, European exporters have only experienced a slight cooling in their orders. BDO’s Export Growth Index for the EU fell to 99.7 in the third quarter of this year, down from 99.8 in Q2. European exporters are still expected to suffer from secondary pressures as a result of the growing trade war between the US and China. However, the Export Growth Index has remained near the long-term growth trend this quarter, suggesting that EU export growth remains resilient.

This resilience is in part due to the strong performance of Italian exporters. Italy’s Export Growth Index now sits at 100.2, up from 98.9 the previous quarter, and above the long-term growth trend of 100. Germany also continues to post strong export numbers, growing from 98.9 to 99.4 this quarter.

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

“UK export growth is on a downwards trajectory and has now hit its lowest level since the UK decided to leave the EU. With party conference season upon us, we need clarity on the shape of Britain’s future trading arrangements so that UK exporters can prepare for the future with confidence.

“A rise in the proportion of British companies which export goods and services is also vital, spurred by meaningful government support and an ambitious industrial strategy which has exporting at its core.”

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

Q3 2018

(figures for this report)

Q2 2018

Q1

2018

Q4

2017

BDO Export Growth Index

EU

99.7

99.8

98.7

100.8

UK

95.6

97.6

98.7

100.6

Germany

99.4

98.9

99.4

102.9

France

97.6

98.9

99.1

99.8

Spain

98.3

97.1

98.9

102.9

Italy

100.2

98.9

98.2

102.4

BDO Export Inflation Index

EU

108.7

108.8

96.9

102.4

UK

102.7

100.1

97.6

98.9

Germany

100.8

103.1

98.9

103.0

France

112.9

108.5

90.2

108.7

Spain

108.8

116.7

109.6

103.9

Italy

101.6

101.7

107.4

106.4

 

Notes to editors

Accountancy and business advisory firm BDO LLP provides integrated advice and solutions to help businesses navigate a changing world.

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.

BDO LLP

BDO LLP operates in 18 offices across the UK, employing 3,500 people offering tax, audit and assurance, and a range of advisory services. BDO LLP has underlying revenues of £428m and is the UK member firm of the BDO International network.

BDO International

The BDO International network provides business advisory services in 158 countries, with 68,000 people working out of 1,400 offices worldwide. It has revenues of $7.6bn.

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.

Contact

Alexander Dickie at Teneo Blue Rubicon on behalf of BDO LLP

Mob: 07876 287318
Tel: 0207 260 2700
Email: [email protected]