Rebalancing of UK economy towards exports is underway, but progress is too slow

24th October 2012

Over half (54%) of businesses confident they will improve turnover The sixth DHL/BCC Trade Confidence Index, a measure of the UK's exporting health, reveals that UK export sales and orders are still growing.

However the rate of growth reported by the 1,897 businesses surveyed, shows that this growth has slowed in Q3 2012, a disappointing fall on the previous quarter's results. The report is launched today at the BCC's International Trade Conference, with speakers including Lord Green, Phil Couchman, Chief Executive Officer, UK & Ireland DHL Express, and Richard Reed, Co-founder of Innocent. In Q3, 39% of exporters reported that their export sales (for the last three months) increased, but this is down from nearly half (49%) of exporters in the previous quarter. Export orders (for the next three months) also saw a decrease: 38% of exporters said that future orders increased, compared to half (49%) in the previous quarter. The majority of firms said export orders and sales remained constant. So despite a focus by the government on rebalancing the economy towards exports, the reality is that exports are not growing as quickly as they could. Trade documentation data (required for all UK exporters trading certain goods in overseas markets) for UK goods exports in Q3 2012 shows an increase of 3% on the same quarter last year, but a fall of 1% on the previous quarter. Continued problems in the eurozone, coupled with a difficult domestic economy means many exporters will face challenges over the next year. However, many are rising to the challenge. Despite Sterling's steady gains against the Euro and Dollar in Q3 2012, the percentage of firms that said exchange rates were a concern dropped by twelve percentage points to 28% this quarter - a noticeable fall, and by far the lowest figure of the series. The number of firms reporting an increase in confidence also rose slightly. 54% of businesses are confident that their turnover will improve over the next 12 months, and 46% believe their profitability will increase over the same period. In addition, exporters are still fairly confident in creating jobs. Just under a third (30%) of firms said they had increased employment levels, with 31% expecting to employ more staff in the coming months. Almost one in four (24%) firms said they would invest more in training, and a quarter (25%) said they would invest more in plant & machinery, though this figure has fallen from a nearly third (32%) in the previous quarter. Commenting on the results, Phil Couchman, CEO of DHL Express UK and Ireland said: -It's encouraging news that exporters this quarter viewed exchange rates as less of a concern than in previous reports, as there were worries that sterling strength would impact Eurozone competitiveness earlier this year.  However, exporters making inroads overseas still need our strong support if they are to continue to contribute towards a meaningful recovery for the UK. John Longworth, Director General of the British Chambers of Commerce (BCC), said:  -Rebalancing the UK economy towards exports is key to ensuring the UK's economic recovery is sustainable. The latest DHL/BCC Trade Confidence Index shows that the environment for many exporters is challenging. While many businesses are breaking into new markets, challenges in the Eurozone and the wider global economy have created uncertainty for others. The survey shows that confidence in the longer-term outlook for turnover and profitability is on the up, however increasing concerns about cash flow and weakening balances for export sales and orders in the near-term, underscore the importance of taking action now to support exporters. The government must not allow a lack of export support and cashflow problems to choke off a export-driven recovery.

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