The UK’s goods exports slumped by £54bn in 2020 and Britain lost market share to its main competitors as Covid-19 hammered global trade, according to new research published this morning.
The findings, from Aston University’s Lloyd’s Banking Group Centre for Business Prosperity, showed that Britain suffered a 14.7 per cent drop in goods exports, one of the largest of any major country in 2020, and also saw a slower recovery as other nations gobbled up market share in key export destinations.
Goods exports including cars, oil and gas, machinery and pharmaceuticals all tumbled as the pandemic battered economies worldwide and supply chains broke down.
The impact would have been even worse without massive inflows and outflows of gold, as investors bought up the safe-haven asset, researchers pointed out.
The report’s authors, who analysed the latest available UN trade statistics, said the UK would need to make raising productivity its “central goal” to avoid further decline post-Brexit.
Jun Du, professor of economics at Aston Business School and director of the Lloyd’s Banking Group Centre for Business Prosperity, told City A.M. this morning that “the fundamental causes of the UK’s dismal trade performance go beyond trade itself. Our analysis shows that long-term stagnation in productivity growth is the key reason for the subdued competitiveness of the UK economy.”
The researchers compared the impact of Covid-19 in 2020 with the effects seen during the recession that followed the financial crisis of 2008, finding that while the drop in GDP worldwide had been higher in 2020, trade had not been hit as hard.
This was explained, they said, by the fact that the pandemic and lockdown restrictions had affected different countries at different times, but also by the resilience of so-called “global value chains”, or trade networks.
But turning to the impact on UK goods exports specifically, they found that in nearly every global region, the UK’s top exports suffered sharp declines as coronavirus spread worldwide.
While there was a partial recovery in the third quarter of 2020, the UK was slower than most of its international competitors to take advantage of returning global demand.
Over 2020 as a whole, it lost market share in most product categories in the US, Germany and China, the three major markets anaylsed. Beneficiaries included EU nations such as Spain, Italy and the Netherlands.
The only major exception was gold: the UK exported $3.8bn worth of the precious metal in 2020, a 16 per cent increase year-on-year. It also imported $8.8bn, a 33 per cent rise.
This is mainly explained by flows between the UK and Switzerland. Switzerland is a major gold refining and transit centre, while London is a storage and trading hub for international investors.
Some smaller industries also saw a rise in exports last year despite Covid-19, including ship and boat-building.
Goods exports made up 53.7 per cent of UK exports in 2019, the last full year for which goods and services export data are available.
“Particularly now that it’s outside the EU, the UK needs to punch above its weight in new industrial and technological fields, as well as in new markets,” Du added.
“It can only do this by finally getting to grips with its longstanding productivity problem, because low productivity in trade terms effectively means that our production costs are higher, so our exports are less competitive,” he added.
The report includes a number of recommendations for boosting productivity, including a more joined-up approach to industrial policy, innovation, skills, and trade and investment initiatives.
It also calls for greater investment in public R&D and more use of intelligence around emerging trends to act as an ‘anemometer’ for policymakers and firms.
Co-author Dr Oleksandr Shepotylo added that while government policy could create a framework for addressing productivity challenges, individual firms also needed to pay closer attention in order to reap the potential rewards.
“The smartest firms can use the ‘quantum leap’ in digitalization and new ways of working engendered by the Covid experience to become forward-looking when it comes to the future technologies, skills requisites, management capability and training needs that trading success depends on,” he said.