British-made Mini cars being loaded onto trains to be shipped from Southampton docks.
The EU’s increased importance to UK exports over the past year
While much reporting focuses as normal on a widening of the trade deficit, the export figures have for the past year shown some shift in the relative importance of the EU.
Volume figures show an increase in EU exports of 2.6% on the quarter and 6.0% on the year.
This is in contrast with non-EU exports showing a decline of -2.6% on the quarter, and -1.5% on the year.
The chart shows index numbers: over 2012 to 2014 trade was in the doldrums across the board; with some degree of recovery in the world economy, non-EU exports rose considerably faster; since 2015, however, non-EU exports fallen quite abruptly but EU exports have continued to rise. Since 2012 export volume growth to EU countries has been marginally higher than to non-EU countries (i.e. the blue line is above the red line on the most recent reading; NB this is not the same as saying more exports went to EU countries).
Export volumes, 2012=100
In cash terms, as in all the commentary today, the goods deficit for the first quarter at £34.7bn was at a post-crisis high. Over the year this was up by £1.1bn. The table shows how the damage was done by an increase in imports from the EU, but more important was the reduction in exports to non-EU countries (NB here the signs are reversed, so a -ve refers to a higher deficit).
Change in trade flows, 2015Q1 to 2016Q1
It is likely that the improved export position with the EU reflects wider trends, with recent concerns for the global economy more skewed towards non-EU countries. Serious commodity price falls have hit Brazil, Russia and Canada, worries about China continue and perhaps above all US growth has weakened over recent quarters. In contrast – perhaps boosted in part by the ECB’s incredibly vigorous programme of QE and some reduction in the severity of spending cuts – EU growth has picked up a little.
GDP, quarterly growth
The story is also supported by this extract from an Institute of Directors statement on the figures:
Even with the problems in the Eurozone, a majority of exporting IoD members say that the EU is the market in which they have seen the most growth over the past two years.
Now nobody’s getting carried away – the recent EU macro strategy is very far from ideal, even if it is a little less bad. (Statistically, there have been reliability issues on trade figures, and there may still be concerns with deflators.) But the changed balance and perhaps changed global risk profile are a reminder that it is not sensible to assume that non-EU countries will continue to power ahead in the same way that they have in recent years.