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European export growth plunges to 12-year low

04 May 2020

  • EU export growth plunges to lowest level since 2008 global financial crisis 
  • UK Export Index records steepest decline 
  • Further deterioration expected in Q2 2020

European export growth plummeted to its lowest point since the 2008 global financial crisis in Q1 2020, according to new figures from accountancy and business advisory firm BDO LLP, as COVID-19 wrought havoc on Europe’s major economies. 

The BDO European Export Growth Index - which provides snapshots of the export markets in Europe’s five largest economies – nosedived 11 points from 98.2 to 87.2 in the first quarter of 2020, as the coronavirus outbreak forced hundreds of millions of Europeans into lockdown.

The Index score is now well below the 95-mark, indicating that the annual rate of export growth is in deep negative territory. As the main economic impacts of the coronavirus outbreak only hit Europe during the latter half of Q1, even further deterioration is expected in the second quarter of 2020.

The UK recorded the most significant decline, with the Index for British exports falling 14.6 points to 91.6 – the steepest quarterly drop since Q3 2006. However, the UK’s export growth Index remained the highest of the five economies analysed for a third consecutive quarter – ahead of Germany (88.5), Spain (88.4), Italy (85.1) and France (85.0).

Italy experienced the second biggest drop, slipping 11.7 points, while export growth in France and Spain fell by 9.8 points and 9.0 points respectively.

Commenting on the findings, Peter Hemington, partner at BDO, said: “COVID-19 has shaken the global economy to its core. The widespread factory shutdowns in China at the start of Q1 had already exerted a significant strain on the supply chains of Europe’s manufacturing sector. However, the centre of the coronavirus outbreak has since shifted west, and the mass lockdowns that have ensued across Europe have brought with them a scale of economic and social disruption not seen since the Second World War.

“During the 2008 global financial crisis, the volume of EU exports contracted by more than 11%. Depending on the duration of the current lockdown in Europe and the rest of the world, 2020 could well record an even sharper decline.”

Elsewhere in the report, the BDO Export Inflation Index rose by 1.2 points to 100.2 – propelling it above the 100-mark which represents the long-run average. Increases were recorded in the UK, Germany, France and Spain, while only Italy saw a small drop in line with a steady decline in the rate of consumer price inflation at the start of the year.

The severe demand and supply shocks caused by the coronavirus outbreak, as well as the major fiscal and monetary response, will have a major influence on the Export Inflation Index in the coming months.

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

 

Q1 2020

 

Q4 2019

 

Q3 2019

 

Q2 2019

BDO Export Growth Index

EU

87.2

98.2

98.4

98.5

UK

91.6

106.2

101.6

96.8

Germany

88.5

95.5

95.5

94.6

France

85.0

94.8

97.4

101.0

Spain

88.4

97.4

95.4

100.5

Italy

85.1

96.8

97.8

98.1

BDO Export Inflation Index

EU

100.2

99.0

96.2

103.0

UK

98.0

95.3

98.7

99.2

Germany

98.2

95.2

95.2

99.7

France

98.2

96.5

93.3

100.4

Spain

100.0

99.2

93.9

97.6

Italy

101.1

102.3

99.0

100.2

 

Note 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 17 offices across the UK, employing 5,500 people offering tax, audit and assurance, and a range of advisory services. BDO LLP is the UK member firm of the BDO International network.

BDO’s global network

The BDO global network provides business advisory services in 167 countries, with 88,000 people working out of 1,800 offices worldwide. It has revenues of $9.6bn.

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.

Contacts

Hannah Pini
PR Manager, BDO
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[email protected]

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