£20 billion boost to UK economy by 2020 from credible exports strategy – CBI / Ernst & Young

Published on Monday, 21 November 2011 09:36
Posted by Scott Buckler

Introducing a credible new exports strategy, which focuses on the right products and services, concentrates efforts on high-growth markets and breaks down domestic barriers, could give the UK economy a £20 billion lift by 2020

That is the key finding of a major new report:Winning overseas: boosting business export performance, published today (Monday) by the CBI and Ernst & Young, which urges the Government to set out a clear exports strategy with ambitious, achievable performance targets.

The Government should aim to increase net exports from -2.4% in 2010 to 2.5% by 2016, with exports rising from 29% of GDP in 2010 to 36% by 2016. Small and medium-sized companies (SMEs) have some of the most potential to grow, so the UK should aim to match the EU average of one in four SMEs exporting by 2020, compared with only one in five currently.

John Cridland, CBI Director-General, said:

"The UK has a proud history as a great trading nation, but in recent years our performance has been lacklustre. Exports success will be one of the key drivers of growth, but for too long we have been over-dependent on advanced economies for our trade.

"The continued crisis in the Eurozone underlines just how important it is for the UK to diversify its export efforts to high-growth countries. Given that we're already playing catch-up with many of our competitors, we must act now or never to target high-growth economies, leapfrog the competition and deliver our growth potential.

"We need to capitalise on the booming success of the BRIC countries, and look beyond the curve to future high-growth markets such as Indonesia, Mexico and Turkey. The new middle classes in emerging economies will have needs that our niche, high-end producers are more than able to fulfil."

The UK's largest export market is currently the United States (17%) followed by countries in Western Europe, whereas the UK has had limited success in the BRIC countries (Brazil, Russia, India and China), with only 4% of our exports going there. The report calls for national exports to the BRICs to exceed 11% average growth in value terms by 2020. It also identifies the need to get ahead of the curve and focus now on the 'next eleven' countries: Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey and Vietnam.

Among the areas with high export growth potential in the next decade identified are: construction services, communication services, electrical goods, optical and high-tech goods, and financial services. If these sectors successfully tap into demand from high-growth economies then GDP could be boosted by 1.5%, or £20 billion, by 2020. In addition, the UK's world class creative industries sector has huge potential for export growth.

On the need for businesses and the Government to work more closely together, Mr Cridland said:

"Too often businesses are finding that the Government's public rhetoric does not match with the reality of their experience on the ground, so we're calling on the Government to set out a credible exports strategy with achievable performance targets.

"UKTI appears to have a 'marmite effect' among businesses and it must become more commercially focused in its activity. In addition, access to export finance must be made easier, especially for medium and smaller-sized firms. Some of the UK's mid-sized companies, 'the gazelles', have the most potential to export and grow.

"Businesses must play their part too. We need to hard-wire exporting into our DNA like many of our competitors, and firms need to share expertise more effectively and shout about their successes."

The share of the UK's global exports has declined sharply over the last decade, from 5.3% in 2000 to 4.1% in 2010, while at the same time Germany's share increased from 8.9% to 9.3%. This decline is principally because of our weak global goods exports, which have dropped from 4.4% to 3.1% in the last decade.

However, the report reveals there is some cause for optimism because the UK is a net positive service exporter, with an average annual growth of 4.6% since 2000. Our services are likely to be in even more demand in the future as living standards in developing economies rise. In the coming decade, consumer spending growth in the BRICs is expected to average 13.5% per year.

Steve Varley, Ernst & Young UK & Ireland Managing Partner, added:

"Our inability to break into and succeed in high-growth markets is due to a historic mismatch between the goods and services we currently sell and those demanded by high-growth economies.

"Demand in the last decade from the BRICs has been for manufacturing goods, including machinery, tools and equipment, but in many cases UK companies haven't been strongly positioned enough to compete globally to win this business.

"With the changing demographics in high growth markets, including the rise in the middle classes and consumer spending levels, now is the time for the UK to seize the opportunity to build on its comparative advantage in sectors such as construction services, communication services, electrical goods, optical and high-tech goods, and financial services.

"By tailoring products to specific markets, supported by strong high-quality business intelligence, guiding them every step of the way, businesses can enhance their export performance and boost the UK economy."

Analysis from the Ernst & Young ITEM Club shows that if the chemical sector has targeted itself better geographically and had a great focus on industrial chemicals, it could have boosted exports by 15% between 2000 and 2010, worth £3.5 billion to the economy.


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